Enterprise

Consulting firms aren't just recommending software anymore, they're building it

Management consulting firms like McKinsey and Booz Allen are upending the traditional consulting model and building their own software.

Booz Allen Hamilton

Booz Allen is just one of several traditional consulting companies that are increasingly building software for their clients.

Photo: Jim Watson/AFP via Getty Images

A cloud-native, consumer-facing digital platform was built from scratch in 15 months using agile software development. The portal runs on AWS and has more than 163 million page views. It wasn't designed by a software company; in fact, it wasn't even designed by a tech company — it was built by a consulting firm.

That portal is recreation.gov, the U.S. government's one-stop shop for public land use across the nation. And it was built by software engineers and cloud architects from the defense contractor and management consulting firm Booz Allen.

Years ago, no one would have believed it if you told them consulting firms were hiring software engineers and beating out tech companies to win development projects. Instead, consulting firms focused mostly on recommending software vendors, or advising clients on technology implementations.

But the traditional model of management consulting is being flipped upside down as every company tries to figure out how to become a software company. Gone are the old days of consulting firms selling people, time and resources; now, consulting firms are selling actual software and products.

Meet the new consulting

Haluk Saker, a senior vice president for Booz Allen from Turkey, is an engineer by both trade and passion. "All I wanted to be was an engineer and stay as an engineer," he told Protocol.

When Saker came to the U.S. after earning his master's in engineering, his objective was to use his skills across multiple products and projects, which led him to Booz Allen. "But then I quickly realized in Booz Allen, OK, you're an engineer, then a tech lead, then an architect and then some sort of manager." Saker wasn't interested in the traditional consulting career path. So even after rising from a software engineer to a partner, he found a way to stay deeply technical by communicating his career ambitions upfront.

Saker's path soon became the model for a new engineering track at Booz Allen. "Booz Allen invented the technical track based on my progression," he said. He's one of the few hands-on technical partners in Booz Allen, and was the driving force behind the recreation.gov proposal and rollout.

Winning that project was an eight-year journey full of hackathons and client presentations. During one of those hackathons, Saker was in the basement of the Department of Labor in Washington, D.C., working with three of his best teams, while the rest of the teams were from the Bay Area.

"People see Booz Allen as a defense contractor — everybody ignored us," Saker said. Everyone except the client; Saker's team of engineers ended up winning the entire hackathon. "The top four companies all were product companies, they had their products or similar jobs. We had just our brainpower," he said.

Saker's journey is representative of a broader shift in the consulting model.

Francisco Caudillo, a solutions leader at McKinsey, a consulting firm that also designs software for clients, believes the industry has come a long way from the stereotype of dumping 100-page strategy documents on clients' desks, leaving them to figure out the implementation on their own.

"I think that's probably a stereotype of, I don't know, maybe the '80s or even '90s? I don't think that is the case anymore," said Caudillo. What consulting firms do now is "start projects and they have some risk involved in the sense of, 'If this works, then we are going to bear part of that risk.'"

Booz Allen also follows a similar approach, which they call a "transaction-based fee model." The model lets both Booz Allen and its government clients make money as the product produces revenue. In the case of recreation.gov, Booz Allen invested in the development of the platform, which then generates income for the firm on a transactional basis.

Soren Kaplan, an affiliate research scientist at the USC Center for Effective Organizations, believes these shifts are occurring in part because the old "billable, time-based business model is not scalable." He thinks consulting firms need to look at how they scale beyond just selling time, because you can't scale people.

"As you look at how to scale a business, and you look at how to scale offerings, if it's people-based, it's not as scalable as if it's software-based," Kaplan said.

The challenge with building software and products, however, is finding the talent to build that software. The "cliche of the MBA graduate coming and going to solve the challenges of clients is definitely something that's going to change," said Caudillo. To him, the future of consulting is one that centers around the nexus of business and technology.

"The main challenge for the consulting world really is going to be: How do you find the talent that is at the intersection of those two points? The business acumen and the technological acumen," he said.

The talent race

Saker is passionate about beating Big Tech when it comes to talent. "I'm not competing with Apple, Google, Netflix by any means for a project, but I compete with them for the talent. So I lose talent to them, I steal talent from them," he said.

So when Booz Allen does beat the Apples, Googles and Amazons of the world in the race for talent, how does it do it?

Saker believes when it comes to winning talent, it's all about culture. "If the person likes you, it's a lot more likely that that person will accept my offer versus Microsoft or what the other companies offer," he said.

At McKinsey, Caudillo says engineers join the consulting firm to work on different products at different companies over the course of their careers. "If you think about companies like Facebook and Google, they are working towards a product," said Caudillo. The difference at McKinsey is, "We're not trying to sell software, we're not trying to sell a product, we are trying to solve a challenge," he said.

Consulting is still not tech

Still, consulting firms aren't tech companies.

"I don't think any of the consulting firms will see themselves as substituting SAP or IBM or those kinds of providers. That's something I don't think is going to happen. It's more a complement than a substitution," Caudillo said. He doesn't think "consulting firms will ever be able to play at the volume and scale of companies that are specialized." Because when it comes to software development, larger consulting firms "lack the skills and capabilities to do that at scale because it's not their core business," he said.

Kaplan agreed that there are some structural barriers preventing consulting firms from innovating and building software.

When a consultant has to bill 40 hours a week, all the innovation has to be accomplished in their spare time. "And it's not going to be valued, because the rewards and recognition are usually set up on billable time," Kaplan said.

Consulting firms do have several strategic and competitive advantages when it comes to selling actual software. "People go to consultants because they need expert knowledge, either content-expert knowledge or process-expert knowledge," said Kaplan. They are also close to their customers, "so if you can find the technology opportunities and partners, and then match them with your existing clients, you can do rapid experiments and prototype," he said.

These advantages have played out well for Saker. And he prefers to show, not tell.

"I'm not a sales engineer," he says. "So they do some magic and they sell. But I do magic by building prototypes." This approach enables Saker to show solution designs to clients in real time, often winning them over.

Ultimately, Kaplan thinks the long-term value of consulting will come from building technology that stays with the client. "You're going to start to see many more product offerings and software, service and subscription business models, and partnerships between the consulting firms and startups as well as big companies like IBM," he said.

That means consulting companies are starting to look a lot more like software companies, just as every company in the world is thinking about how to get better at building and maintaining software. It's a challenge for them, but it will also be a challenge for older enterprise tech companies with longstanding technical relationships with clients, which will now face more competition.

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