Globalisation vs. localisation: How tariffs may reshape the consulting industry

Despite the year’s tariffs and trade wars, 98% of clients still think that further international investment is or will be important to their organisation. Clients haven’t stopped looking for new markets, developing more complex products, accessing new talent pools, and/or trying to exploit the dwindling number of low-cost locations in an effort to increase their margins. However, two thirds of clients think the tide has turned on globalisation, with 38% saying that we live in an increasingly localised and fragmented world.  

This misalignment between corporate goals and political direction is likely to increase demand for consulting firms, as client organisations struggle to square billions of dollars’ worth of operational circles. This work is unlikely to be net-new: Based on interviews we’ve carried out with clients, the assumption is that budgets from other projects will be redirected to deal with these urgent issues. 

But increasing fragmentation also brings challenges for consulting firms. 

For the last 20 years or so, consulting firms have sought to be more globally integrated. The widely held assumption has been that the more internationally connected your firm is, the bigger your advantage. Global firms are thought to provide a consistent service across multiple countries. Because they can build global delivery networks, based on labour cost arbitrage, they can offer clients cheaper rates while earning higher margins. By creating global processes and governance structures, they’re better placed to invest, to develop people’s careers, and to manage risk. Smaller, more regional or local firms tend to lose out, not only because they lack the scale and coverage to take on very large projects, but also because it’s harder for them to make good use of local pockets of deep expertise.  

At the same time, globalisation hasn’t always been an unalloyed force for good. Large consulting firms—arguably even more than their clients—have created a supra-culture, one that isn’t just consistent across all geographies, but which is very similar across the entire industry. Walk into any major consulting firm and you’d be hard-pressed to say whose office it is. No wonder firms are keen to “own” a specific colour.  

Our research suggests that, as globalisation enters a new phase, firms need different ingredients for success. Competitive advantage will come from being able to switch between different models of delivery, perhaps having regional hubs for specialist expertise (automotive in Germany, energy in Houston, for instance) with experts who can complement both local and global project teams. Multinational projects will produce better, faster results if they have support from people who know how to get things done in a local subsidiary.  

Adapting to this complex world depends on greater acknowledgement of the differences between geographies and a shift to more devolved decision-making. But there’s an underlying fear that the more localised a firm is, the more chaotic it becomes. Wave goodbye to worldwide masterbrands, say global brand teams of firms whose budgets have been cut. Say adios to the standardised cross-border contracting and internal charge-out rates that help global client partners win and deliver global work.  

Clients themselves are providing some sense of what happens when globalisation goes into reverse: We recently interviewed a senior executive in a life sciences company who complained that cultural differences between teams in the US and Europe, which they’d taken care to manage for the last 30 years, were becoming so marked that they were having a material impact on the business’ ability to get things done. It’s the kind of story that sends frissons of fear down the spines of managing partners. 

The key change consulting firms need to make isn’t geographic or even operational: It’s psychological. In this (not especially brave) new world, firms should start with what clients want. They need to create more flexible governance structures, and the process of doing so could mire them in years of internal wrangling. Given this, it’s best to be positive, to make it clear that these changes reflect their commitment to serving clients as the latter’s needs evolve.  

The process of adaptation may be painful—but it’s likely to be lucrative. 

What can firms do next? 

Our upcoming Emerging Trends report, The new consulting frontier: Adapting to global economic change, lays out the opportunities for firms in a changing world. Access the report. 

Source has spent more than 15 years researching client demand in different geographies and our model of the global professional services industry is based on more than 190 countries. We can help you understand how global, regional, and/or local your firm should be, based on what clients want. To find out more, get in touch.