Though foreign companies have long dominated the consulting industry in China, domestic companies are now pooling resources to compete with their peers and grab a slice of the lucrative pie.

A limited number of qualified Chinese consultants, increasing requirements and an overabundance of agencies have resulted in several companies joining hands to create larger firms, says Zhao Tianle, chair of the Management Consulting Committee of China Enterprises Confederation China.

"With more Chinese companies growing in scale, consultancy requirements have also started to be more demanding. It has also led to a situation whereby the smaller firms may find themselves pushed out of the race," Zhao says.

"The result is a situation where only the large firms are left, while some smaller firms may merge to create a big entity. In other words, although the number is decreasing, you will find that the scale of these Chinese consulting firms is expanding."

The frenetic pace of activity in China's consulting industry is a clear sign that the industry is evolving at a much more rapid pace than it happened in the West. Real action on the consultancy front started in the 1990s after the concept was introduced from Japan. Most of the developments that have taken place have more or less veered toward the business models developed by firms in Germany and the Netherlands, Zhao says.

It was not until 2005 however, that the domestic firms had reached a state where they could properly compete with their Western counterparts. Though late to the game, many Chinese firms have experienced a rapid evolution and some of them like Alliance PKU Management Consultants Ltd, Adfaith Management Consulting and China Stone Management Consulting Group are now gaining more traction in the domestic market.

"Chinese companies looking to expand in the overseas markets generally prefer to use the services of foreign consulting firms. However, if the same companies are planning expansion within China, they hire Chinese consulting firms."

With more than 11,000 Chinese agencies employing 150,000 consultants, the industry now boasts several companies with 1,000 or more employees earning hundreds of million yuan in revenues annually.

But competition between Chinese and Western firms is not just over clientele. "There is a constraint of talent," says Norman Sze, managing partner of Consulting for Deloitte China. "We cannot grow fast if we don't have access to qualified people."

Sze, a veteran of the consulting industry who has worked in China consulting for more than 18 years, says because of the industry's youth the number of those qualified to do the job is limited.

The result is fierce competition for native-Chinese experts between Chinese and foreign businesses. In 2011, Deloitte China hired more than 120 people. In 2012, the number is expected to jump to more than 135.

With big hiring quotas to fill and only a limited number of applicants, domestic and foreign companies are wrangling over a limited talent supply. As more Chinese firms try to overtake their foreign peers in the talent race, the qualifying standards are also rising rapidly.

"The biggest issue facing Chinese management consulting firms is the lack of consultants, as requirement for a consultant is very strict.

"The current rules stipulate that consultants should possess thorough knowledge and long-standing practical experience in their field of specialization. Since China has a short history in consulting, it is therefore not easy to find experienced consultants," Zhao says.

toddbalazovic@chinadaily.com.cn

(China Daily 07/13/2012 page5)