The most powerful people in the consulting sector in 2024
Last year, the nation’s key players were from the top five firms. This year, they are all outsiders. AFR Magazine’s hotly anticipated Power issue is out on September 27.
There’s no escaping the long shadow of the PwC tax leaks scandal. More than 18 months after it first came to light, it is still reshaping the consulting sector, as the big four firms cede ground to smaller players and independent contractors.
Private sector clients are more selective about what they get external advisers to do and are increasingly sourcing services from smaller firms. The Commonwealth has an ongoing war on the major firms. Not helping is the rapid takeup of artificial intelligence which will likely be as much of a revenue destroyer as it is a generator for the firms.
The net effect has meant that Deloitte, EY, KPMG and PwC have all posted shrinking revenue and profit while smaller firms grow rapidly. Players like mid-tier accounting firm BDO are making the most of the opportunity by opening offices in Canberra, while independent contractors and freelance advisers (many former consultants from the big firms) have had a resurgence via marketplace platforms such as Expert360.
From left: Katy Gallagher, Deborah O’Neill, Paul Howes, Tony Shiffmann and Bridget Loudon. Sam Bennett
1. Katy Gallagher
The finance minister has made strides in her mission to cut the Commonwealth’s use of contractors and consultants and to increase the skills within the public service. The big four inked just $607 million in work for the federal government last year. This is down nearly 50 per cent from a peak of $1.2 billion in 2021-22, excluding extensions. It’s the lowest level in five years. The government has set up its own in-house consulting outfit and killed off a series of high-profile Coalition government technology projects that had been floundering, such as GovERP and the digital passenger declaration. Meanwhile, the number of federal bureaucrats has jumped nearly 10 per cent to almost 210,000 – and is up about 25 per cent since the COVID-19 pandemic. The big four and the major tech consulting firms are among the hardest hit by the changes. This has led to many professionals exiting the big branded firms for their own set-up or a smaller firm in the hope that they will have more luck selling (much smaller projects) to bureaucrats.
2. Deborah O’Neill
The Labor senator has continued to uncover more details about the PwC tax leaks scandal as chairman of the joint parliamentary inquiry into the partnership models of the big four firms. The most recent public hearing was a blockbuster by parliamentary standards. PwC Australia’s current CEO Kevin Burrowes admitted he had taken a year to reveal he was also being paid by PwC International but denied it was a conflict of interest. Burrowes also argued that while he’d never seen the report into the actions of overseas partners involved in the leaks matter, he was sure he didn’t need to know the details to reform the Australian operation. The result of this is that once again, PwC united parliamentarians across the political spectrum in consternation. It’s why we will probably still be talking about the tax leaks scandal this time next year.
3. Paul Howes
Sometimes it takes an outsider to point out the obvious. Union official turned KPMG consulting boss Howes did just that when he said in June that there had been a “fundamental shift” in the advisory market away from “legacy assessment and advice services”.
The comment, made as he announced an $80 million cost-cutting exercise that included shedding about 200 jobs and a shift by the firm towards tech-based consulting, captured what many in the industry already knew but didn’t want to say. And that is that clients continue to have some limited need for consultants to provide general management consulting services – but the real growth area is helping clients upgrade, install and make use of the latest technology.
This means KPMG now wants to become more like the tech-heavy advisory firms Accenture and Deloitte. It’s a risky move given tech consulting is a different business model and involves more risk on the side of the firms because of the size of the projects. But it’s also a concession that there is no longer growth for the biggest firms in pure advice, general management consultancy work and body-shopping (hiring out advisers for ongoing work at a client). That void has been filled by smaller specialist firms (many run by ex-big four operatives) and a growing army of freelancers. Another emerging threat (and opportunity) for the big firms is generative AI which is increasingly being used to do work that junior analysts once cut their teeth on.
4. Tony Schiffmann
BDO Australia’s national chief executive partner has carefully steered what was just another mid-tier firm to become the fifth-largest in the country by revenue – and he’s confident the firm can continue to aggressively expand. BDO grew by 14 per cent in 2023-24 to post revenue of $540 million in a year when the big four all became smaller. It’s not just a one-off, with revenue growth of 16 per cent in 2021-22 and 18 per cent in 2022-23. Under Schiffmann, the firm has grown its corporate business, which provided auditing and tax services for smaller listed companies, by winning clients away from the big four firms.
The next ambition is to bulk up in public sector consulting. The firm has recruited Paul McDougall, formerly of PwC and Scyne Advisory, and Ridhish Arora, who is ex-Deloitte and Sayers Group, to lead its new Canberra office. Schiffmann reckons the operation can grow to up to 10 partners and 100 staff generating up to $50 million in annual revenue in the next four years. The firm, like other smaller firms seeking Commonwealth work, is betting that even at a lower level of demand, there will be plenty of opportunity for specialist outfits.
5. Bridget Loudon
The Expert360 co-founder and chief executivehas built up the consultant and contractor marketplace to the point that about half of the ASX 200 now use it to hire and manage freelance advisers and tech professionals. There are about 5000 active freelancers on the platform each month and they stick around for an average of five years.
One data point that Loudon likes to recite: with about 1500 strategy firm alumni in the system, Expert360 now has more strategy consultants than the three best-known strategy firms. The appeal for consultants happy to strike out on their own is they earn more of the fee, even though they are charging less than the branded firm and even after Expert360 takes its cut. A former top-tier strategy consultant with about five to seven years’ experience can take home $1400 a day compared to the $800 a day they would earn within the firm. (There is, of course, more risk for the consultant but it’s clear many are willing to bet on themselves.)
On the client side is easy access to vetted consultants trained by the top firms they can hire for a fraction of the regular day rate (think thousands) for one-off or ongoing work.
The AFR Magazine annual Power issue is out on September 27, inside The Australian Financial Review. Follow AFR Mag onInstagram.
