In-house Consultants vs. External Consulting Firms

by | Sep 7, 2020

The decision to hire full-time internal consultants or work with external consulting firms on a project-basis is based on several factors including the cost, expertise required, availability of resources, urgency, and the credibility of the in-house vs. external options. The goal of both in-house consultants and external consulting firms is to evaluate problems and recommend feasible solutions, but there are several variations in how each of these groups function, the kind of projects they thrive in, and their overall value-addition to the business.

In-house Consultants

In-house consultants are employees within a business who work on the projects that they are assigned to internally. If the company has the resources to set up a department specifically for consultants, it will consist of specialists in subject-matters that usually revolve around the nature of the projects that the company is working on.

Advantages of In-house Consultants

  • In-house consultants have a vested interest in the success of the whole company, and not just the project they are working on, therefore giving them an integrated understanding and a more holistic awareness of any given situation.
  • They are responsible for maintaining long-term client relationships as they are full-time members of their employing organizations.
  • They have the advantage of already being familiar with the internal processes of the company.
  • They would be able to access more internal information, possibly even faster, as they will not be restricted by the confidentiality policies that would apply to external consultants.

Disadvantages of In-house Consultants

  • Even when a project has been completed or the company no longer requires the expertise of in-house consultants until the next engagement, they still have to absorb the fixed costs of these employees.​
  • In-house consultants may not have the required knowledge in certain domains but still be required to work on a project due to internal resource utilization obligations.​
  • Making objective decisions can be harder for internal consultants due to intimidation of office politics and emotional bias.​

External Consulting Firms

External consulting firms are normally third-party companies who seek to optimize the success of the engagement they have been hired for. External consultants who possess the desired knowledge, experience, and skills can build a solid foundation to sustain the objectives of their clients and see their projects through to fruitful completion.

Advantages of External Consulting Firms

  • External consulting firms can cater to a wide range of businesses because they usually employ specialists in a relatively broader range of subjects.
  • Although external consulting firms may charge higher rates for their expertise, they could be the more cost-effective option in the bigger picture as they can be hired only when required, rather than having to pay full-time salaries.
  • If you choose to work with a reputed external consulting firm, this will be a huge factor in increasing the credibility of your company, in turn.
  • External consulting firms have the advantage of viewing situations from an “outsider’s perspective”, which could be the fresh input that your company requires at a given point.
  • Most clients tend to rely on the input of external consulting firms more because they know it comes with less bias.
  • They usually have a broader and more esteemed network because they rub shoulders with the best minds in the industry as a part of their core jobs.

Disadvantages of External Consulting Firms

  • The consultants may not always be present onsite physically since they could potentially be working with multiple clients at a time.
  • You have to be cautious of the contractual obligations made with external consulting firms, specifically bearing in mind the clauses for handling change requests and deviations in the scope of work.
  • It could be hard to assign accountability to external consultants after the project lifecycle has ended, unless you choose to work with a consulting firm that provides post-completion support and involvement to see the project through to the fruitful achievement of its set objectives.

The Power of Combined Forces

Needless to say, working with subject matter experts does not have to be done in individual silos, neither do they have to be mutually exclusive. Even if you already have an in-house consulting team, you can still work with external consulting firms when the need arises. The decision should be taken after careful evaluation of the nature of the requirement along with wider economic factors.

If you are contemplating working with a well-reputed external consulting firm, feel free to reach out to us to learn more about how we can help your organization with our expertise in IT, risk, and management consulting.