Why Big Consulting Firms Are Losing Their Edge in 2025?

Summary

In this video, Eric Kimberling, CEO of Third Stage Consulting, critiques the traditional business model of large global consulting firms in the ERP and digital transformation space. He highlights issues such as conflicts of interest, biases towards specific software, and inefficient staffing practices that inflate costs. Kimberling shares personal experiences from his career at PricewaterhouseCoopers, emphasizing the industry's flaws, including the training of junior consultants at the client's expense. He suggests that organizations need to take control of their projects and manage consulting firms effectively to ensure success and transparency in their digital transformation efforts.

Takeaways

• 😀 Large global consulting firms have historically dominated the ERP and digital transformation space, but their influence is waning.
• 😀 Many big consulting firms, such as Price Waterhouse Coopers and Accenture, often recommend specific software due to internal biases or financial incentives.
• 😀 Consultants at large firms may be incentivized to recommend certain products because of business alignment or commission from software vendors.
• 😀 The business model of large consulting firms creates conflicts of interest, especially when they are more focused on staffing up projects than delivering value.
• 😀 Big consulting firms often prioritize billing as many hours as possible, even when consultants aren't contributing valuable work.
• 😀 There is a lack of transparency in how resources are allocated in big consulting firms, which can lead to inefficiencies and hidden costs for clients.
• 😀 Smaller and mid-sized organizations are being overstaffed with consultants, resulting in inefficiency and higher costs for the client.
• 😀 The reliance on junior consultants in big firms leads to inefficiency and often results in clients paying for on-the-job training.
• 😀 Advancements in AI and technology have made traditional consultant roles less necessary, especially for tasks that could be automated.
• 😀 Big consulting firms tend to focus on their own internal politics and protecting their business interests, rather than aligning with clients' best needs.
• 😀 Third Stage Consulting offers a more independent, tech-agnostic approach, prioritizing transparency, resource optimization, and client success over internal incentives.

Q & A

Why does Eric Kimberling believe the time has come for the big global consulting firms to lose their dominance in ERP and digital transformation?

Eric believes that the consulting space is changing, and the traditional large consulting firms are facing challenges due to their biases, conflicts of interest, and outdated business models. Their dependence on recommending specific software solutions and focusing on maximizing billable hours has become unsustainable in the face of new, more cost-effective and transparent consulting approaches.

What is one of the main biases found within large consulting firms, according to Eric Kimberling?

One of the main biases is the tendency of large consulting firms to recommend specific software solutions, often due to financial incentives. For example, Eric shares how his team at Price Waterhouse Coopers was expected to recommend SAP, even though other technologies could have been viable options.

How does Eric describe the conflict of interest inherent in big consulting firms?

Eric describes the conflict of interest in large consulting firms as stemming from financial incentives. These firms often have a vested interest in recommending certain products because they benefit from commissions or have internal divisions dedicated to those products, leading to recommendations that may not be in the best interest of the client.

Why does Eric suggest that large consulting firms overstaff projects?

Eric explains that large consulting firms often overstaff projects to maximize billing hours and generate revenue. While this might seem normal, it can lead to inefficiencies and unnecessary costs for the client, as the firm prioritizes getting as many consultants on the project as possible rather than optimizing the resource allocation.

What does Eric mean by 'training grounds' for new consultants in big firms?

Eric refers to big consulting firms as 'training grounds' because they often place junior consultants on projects for the purpose of their development, which can result in clients paying for inexperienced consultants' learning on the job. This dynamic is becoming more recognized by clients, leading to a loss of value from large firms.

How has the development of AI and self-learning impacted the consulting industry, according to Eric?

Eric highlights that the advancements in AI and self-learning technologies are reducing the need for junior consultants to perform tasks such as documentation and research. As a result, clients are starting to realize that they can achieve more efficient results without relying on less experienced consultants, undermining the traditional model of large consulting firms.

Why does Eric criticize the high costs associated with big consulting firms?

Eric criticizes the high costs of big consulting firms because they often inflate project expenses by overstaffing and not providing clear value for the resources deployed. These firms are skilled at managing client perceptions but may not always deliver the most cost-effective or efficient solutions.

What does Eric mean by the term 'arrogance' in relation to big consulting firms?

Eric describes 'arrogance' as a tendency within big consulting firms to look down on those outside their team, leading to a lack of transparency with clients. This attitude can prevent clients from being fully aware of underlying project issues, inefficiencies, or mistakes, ultimately resulting in a negative impact on the project's success.

How does Eric suggest organizations should manage consultants during a digital transformation?

Eric recommends that organizations take a more active role in managing consultants by overseeing the project plan, staffing, and budget. Instead of deferring to consulting firms, clients should manage consultants like any other vendor to ensure they are being used efficiently and effectively.

What is Eric's stance on the business value of big consulting firms?

Eric acknowledges that big consulting firms can bring value to the table, but he believes the downside risks associated with their business model are unsustainable. He suggests that the industry is shifting, and clients are becoming more aware of the flaws in the traditional consulting model.