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Some bad takes in that old discussion. "Consulting doesn't scale" "Sure it does, just look at Accenture!" No, Accenture is big because consulting is not very

Some bad takes in that old discussion. "Consulting doesn't scale" "Sure it does, just look at Accenture!" No, Accenture is big because consulting is not very profitable and it's easy for Accenture to accumulate smaller shops for the bodies. Sooner or later, people running smaller shops get bored and sell to companies like Accenture. Big companies can also more easily leverage foreign, low-cost labor and provide a complete solution. It's hard to provide a complete solution, including QA/testing, test writing, documentation, etc if you are a small body shop with 10x engineers that you need to bill out at $400/hr. Accenture will never come close to the profit per employee of a company like Google or Meta due to the poor scaling.

cbsmith 3y ago
I'm always confused by the different properties people imbue with the term "scale". Accenture is an example that consulting does scale by definition, because it's a profitable business that is operating at a much larger scale. It just that when it scales, the profit tends to grow linearly, or even sub linearly. This is in contrast with businesses like Google or Meta where the expectation is that they'll scale exponentially —though you'll notice that once they reach a certain size, they tend to shift back to more linear or sub linear profit growth... That's a niggly detail best left ignored by investors. ;-)
- 01100011 3y ago
  It depends on the context. In all of the discussions I've had on this topic, the quality people are concerned with is the performance of a company as an investment. In that sense, consulting does not scale. Sure, you can build a big, mildly profitable, consulting company, but that isn't very interesting to most folks.
  - cbsmith 3y ago
    > In that sense, consulting does not scale. Again, I believe you are presuming an exponential scale. Yes, if you invest in a consulting business, the rate of return isn't likely to grow exponentially, but it will grow, and it's entirely possible profits will grow proportionately with the investment. Saying a business doesn't scale, from an investment perspective, means that the business can't leverage the investment to increase profits. That's certainly true of some businesses, and certainly true of some consulting businesses, but observably not true for any sector Fortune 500's are in.

cbsmith 3y ago

I'm always confused by the different properties people imbue with the term "scale". Accenture is an example that consulting does scale by definition, because it's a profitable business that is operating at a much larger scale. It just that when it scales, the profit tends to grow linearly, or even sub linearly. This is in contrast with businesses like Google or Meta where the expectation is that they'll scale exponentially —though you'll notice that once they reach a certain size, they tend to shift back to more linear or sub linear profit growth... That's a niggly detail best left ignored by investors. ;-)

01100011 3y ago
It depends on the context. In all of the discussions I've had on this topic, the quality people are concerned with is the performance of a company as an investment. In that sense, consulting does not scale. Sure, you can build a big, mildly profitable, consulting company, but that isn't very interesting to most folks.
- cbsmith 3y ago
  > In that sense, consulting does not scale. Again, I believe you are presuming an exponential scale. Yes, if you invest in a consulting business, the rate of return isn't likely to grow exponentially, but it will grow, and it's entirely possible profits will grow proportionately with the investment. Saying a business doesn't scale, from an investment perspective, means that the business can't leverage the investment to increase profits. That's certainly true of some businesses, and certainly true of some consulting businesses, but observably not true for any sector Fortune 500's are in.