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Source: 1998 Survey of Service Industries: Management, Scientific & Technical Consulting Industry, Industry Canada, March 2001
Management Consulting Services, Industry Sector Analysis, US & Foreign Commercial Services and US Department of State, 1998
The consulting industry in Canada had grown significantly over the past two decades. The industry was growing at levels greater than 15% per year up to the 1990-92 recession. In 1995, Industry Canada estimated the size of the Canadian Market for Management Consulting services (based on Canadian industry revenues) at between $2.3 billion and $3.0 billion. 2 Although data is not available, annual growth rates for the late 1990s were estimated to be in the range of 20%.3 Consulting revenue in Canada is concentrated in the most populous regions, with more than half of all revenue from the province of Ontario. Many of the largest firms have offices in at least one or two of the larger cities (Vancouver, Calgary, Toronto, Montreal). In the last few years, the accounting based consulting firms have reduced the number of offices by exiting smaller communities. In addition, with the drive to have consultants billable, and working at the client site, larger firms are experimenting with hotelling" arrangements, which enable several consultants to share office workspace. Provincial Distribution of Consulting Revenue, 1998
Total Revenue $000s 2,935,726 1,160,266 710,579 629,197 109,953 64,971 55,348 39,472 14,539 9,543 6,429 5,736,024 % Total Canada % 51.2% 20.2% 12.4% 11.0% 1.9% 1.1% 1.0% 0.7% 0.3% 0.2% 0.1%
Ontario Quebec British Columbia Alberta Manitoba Saskatchewan Nova Scotia New Brunswick Yukon & Northwest Territories Newfoundland Prince Edward Island Canada
Source: 1998 Survey of Service Industries: Management, Scientific & Technical Consulting Industry, Industry Canada, March 2001
Management Consulting Services, Industry Sector Analysis, US & Foreign Commercial Services and US Department of State, 1998
20-100 employees 6%
The largest consulting companies in Canada are the same large international players that one sees in developed nations around the world. Although some repositioning has occurred, there has been little movement in the composition of the top firms over the past 10 years. The large consulting firms are becoming larger and the smaller firms more numerous, and this trend is likely to continue. Frequently, firms which reach 20-50 employees are acquired by the larger companies. Currently, mid-sized Canadian firms include Western Management Consultants Myers Norris Penny, and Johnston Smith International. The top 20 consulting firms in Canada represented more than one third of the total industry revenue in 1999. The largest consulting firm in Canada at the end of 1999 was PricewaterhouseCoopers with revenue of $44.1 million from a total staff of 1749.
Of the firms listed, Andersen Consulting (now Accenture) had by far the highest leverage model, with a ratio of over 75 consultants for each partner. As a result, it also had the highest revenue per partner at over $16 million. The other major firms had an average of between four and twenty consultants per partner. Average revenue per consultant ranged from $110780,000, with most of the top twenty companies billing between $200-300,000 per consultant. Different consulting firms focus on providing different services. Over time, technology related services are becoming an increasing portion of most firms offerings. Leading Canadian Consultancies: Fee Split by Activity
IT Strategy & Organization Financial Project Mgmt HR & Search Change Mgmt Marketing Operations Mgmt Process Facilities / ReOutengineer sourcing Others
Ajilon Canada Aon Consulting Computer Sciences Corporation Hay Management Consultants KPMG Consulting PricewaterhouseCoopers
20 30 30 60
15 20 15 8 10 20 0.5
27 14 80 29
10 10 5 2
3 10 0.5
10 10 21
10 86
1 30
NAICS 54161 Management Consulting Ontario Quebec British Columbia Alberta Manitoba Saskatchewan Nova Scotia New Brunswick Yukon & Northwest Territories Newfoundland Prince Edward Island Canada NAICS 5416A Scientific & Technical Consulting
940,033
311,808
752,850
20
Source: 1998 Survey of Service Industries: Management, Scientific & Technical Consulting Industry, Industry Canada, March 2001
Data for surveyed firms only, accounting for 89% of incorporated firms revenue, and 79% of revenue overall Fees paid to contract employees are not included Includes rent or lease of land and buildings, rent/leasing of motor vehicles, computer equipment, machinery and other equipment, heat, light, power and water, insurance, taxes, permit and licences. Mortgage payments are excluded. Includes fees paid to contract employees, interest paid, office supplies, telephone, travel and entertainment, royalties, franchise fees paid, legal, accounting and consulting fees, and other operating expenses.
Source: 1998 Survey of Service Industries: Management, Scientific & Technical Consulting Industry, Industry Canada, March 2001
3 2 3
71 58 69
15 25 17
11 14 11
Source: 1998 Survey of Service Industries: Management, Scientific & Technical Consulting Industry, Industry Canada, March 2001
Canadian consulting companies provide services to a variety of industries, although some firms have much deeper penetration of different industry verticals. Based on the fee revenue of a selected group of the largest firms, the financial services and high tech firms are the largest private sector users of consulting services. Leading Canadian Consultancies: Fee Split by Industry
Financial Services Mfg. Telecom Gov't Energy / Enviro. Products Utilities Distri-bution Transportation Health-care Techno-logy Other
Ajilon Canada AMS Management Systems Andersen Consulting Computer Sciences Corporation DMR Consulting Group Ernst & Young Consulting Services Hay Management Consultants KPMG PricewaterhouseCoopers
5 60 21 10 23 22 29 9 15
25 9 9 29 4 10 7
10 13 20 15 10
30 30 22 40 13 3 16 29
5 25
5 1 5
20 23 35 10 13 20 4 32
8 20 3 18
4 14 5 8 4 2 4 11 5
10
2 28
Exports
200
Imports
C$ millions
Exports are more predominant in the larger firms. It is estimated that exports account for approximately 15% of total billings, however they may reach over 20% for the largest firms.4 The lower value of the Canadian dollar has made Canadian consultants economical in the US market, and this country is the source of most export revenue. The export of management consulting service to the US has also been facilitated by the North American Free Trade Agreement (NAFTA), and in a broader context by the General Agreement on Trade in Services (GATS). Given the extent of cross border activity, many industry analysts see Canada not as a separate entity but as part of the larger North American market given the numerous affiliations between the major U.S. and Canadian firms and the significant, cross-border relationships held by the major consulting groups. In addition to providing services in the United States, Canadian consultants do export their services around the world. Canadian consultants participate on large projects in the developing world, which are funded by the International Financial Institutions (IFIs), as well as the Canadian International Development Agency (CIDA). In the winter of 2001, CIDA replenished its Canadian Consultant Trust Funds (CCTFs) at the World Bank and the InterAmerican Development Bank (IDB). With these replenishments, CIDA has committed approximately CDN$ 26.5 million over the next four years to be used by the World Bank and IDB to hire Canadians to assist in the preparation of Bank-financed projects.
4
Management Consulting Services, Industry Sector Analysis, US & Foreign Commercial Services and US Department of State, 1998
Sources
1998 Survey of Service Industries: Management, Scientific & Technical Consulting Industry, Stats Canada, March 2001 Management Consulting Services, Industry Sector Analysis, US & Foreign Commercial Services and US Department of State, 1998 Management Consulting Industry, Service Industries Overviews Series, Industry Canada, February 2001 Sector Competitiveness Survey Management Consulting, Industry Canada, 1997 Management Consultant International, 12, January 20,2000 Reprinted by permission of Management Consultant International. Copyright 2000 Kennedy Information Inc, Fitzwilliam NH 03447 USA (800) - 531- 0007 http://www.consultingcentral.com