Infrastructure and services (2 of 3)

Professional services and consulting

About 9 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Firms sell the time and expertise of skilled people (consultants, auditors, lawyers and IT engineers) to companies and governments, charged by the hour, by the project or by the result.

The big idea: The product is people's time. Revenue from one person is available hours times utilization times billing rate times realization, while the main cost, pay, is fixed in the short run. Profit comes from billing juniors at well above their pay, keeping everyone busy on work clients pay full price for, and pricing so the firm keeps the gain when AI or offshore teams do the work in fewer hours.

One unit, in numbers: One consultant for one year: USD 283,500 comes in, and USD 63,500 (22%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: 10 to 25 percent operating margin for listed firms; partnerships pay partners out of profit, so their margins are not comparableRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: LowLittle money is tied up in buildings, machines or stock, so growing is cheap. More on capital intensity
The number to watch: UtilizationHours billed to clients divided by hours available.

Ask this first in a case

Which part are we in: strategy, operations, technology, audit, law or IT services?

Words used above (4)

Utilization:: Hours billed to clients divided by hours available to work.
Billing rate:: The list price per hour or day for a person.
Realization:: The share of the list price the firm actually collects.
Time and materials:: Pricing where the client pays for every hour worked plus expenses.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Consulting and law firms charge for their people's time, by the hour or day, or as a fixed fee for a project.
Some work is paid for results: a share of savings, or a success fee when a deal completes.
Audit firms earn a yearly fee for checking a company's accounts, which many companies must buy by law.
IT services firms earn from multi-year contracts to build and run systems, priced per person, per project or per outcome such as tickets solved.
Profit comes from the gap between the price billed for each person and what that person costs, multiplied across a wide base of juniors.
Offshore delivery lowers both the price and the cost per hour, and wins work on total cost for the client.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One consultant for one year (70 percent utilization, USD 250 standard rate, 90 percent realization). Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Fees collected: 1,800 available hours x 70 percent x USD 250 x 90 percent	USD 283,500	100%
Minus Pay and benefits	USD 150,000	53%
Minus Share of offices, IT and support staff	USD 40,000	14%
Minus Share of the cost of selling and partner time to win the work	USD 30,000	11%
What is left (contribution)	USD 63,500	22%

Check: USD 283,500 minus USD 220,000 of costs leaves USD 63,500.

So what: The consultant leaves USD 63,500 toward partner pay and profit. A fall of 10 points in utilization removes USD 40,500 of fees but none of the cost, so utilization is the first lever, followed by realization and the mix of junior and senior hours.

Key measures(8)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Utilization
Hours billed to clients divided by hours available. Glossary: Utilization
Typical: About 66 percent across 509 professional services firms in 2025, the lowest in 19 years, against a common 75 percent target; about 84 percent excluding trainees at Infosys[10]
Billing rate
The list price per hour or per day for a person, rising with seniority.
Realization
The share of the list price actually collected after discounts and write-offs.
Typical: Varies widely: at some law firms, discounts agreed before work starts bring realization down to 75 to 80 percent, while others keep worked realization as high as 95 percent[11]
Staff to partner ratio
How many people work under each partner; it sets how much work each partner can sell and oversee.
Typical: Measured in hours at the US law firms the Thomson Reuters Institute tracks: about 1.47 associate hours were billed for every equity partner hour in the first half of 2026[12]
Revenue per person
Revenue divided by headcount, to compare firms and delivery models.
Typical: About USD 89,000 at Accenture (year to August 2025) and about USD 51,000 at TCS (year to March 2026), because more of TCS's work is offshore[1]
Book-to-bill
New contracts signed divided by revenue billed in the same period; above 1 means the backlog is growing. Glossary: Book-to-bill
Typical: About 1.2 at Accenture in its year to August 2025[1]
Attrition
The share of people who leave each year; some is expected in a pyramid.
Typical: About 12.6 percent voluntary attrition at Infosys in its year to March 2026[7]
Project margin
Fees on a project minus the cost of the people who worked on it, as a share of fees.
Typical: About 38 percent on average across the SPI Research benchmark firms in 2025[10]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Which part are we in: strategy, operations, technology, audit, law or IT services?
How is the work priced: by the hour, fixed fee, value based or managed service?
What are utilization and realization by level, and how have they moved?
What is the mix of senior and junior hours, and of onsite and offshore hours?
Which clients and services bring most of the profit, and are any at risk?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Win the work: build relationships, answer tenders and write proposals
Margin varies
Partners and sales teams at every firm
A real cost that is not billed: Accenture spent about 10 percent of revenue on sales and marketing in its year to August 2025.
Step 2: Scope and price: agree the question, the team and the pricing model
Margin varies
Partners and managers with the client's leaders or buying team
Time and materials, fixed fee, value based or managed service: the model decides who carries the risk of extra hours.
Step 3: Staff the team: match people to projects and keep the bench short
Medium margin
Staffing teams and managers
Every unbilled hour is paid for anyway, so staffing is where utilization is won or lost.
Step 4: Deliver: analysis, audits, legal work, design and building of systems
Fat margin
Project teams, with juniors doing most of the hours
Juniors billed at well above their pay produce most of the profit.
Step 5: Offshore and shared delivery centres: research, coding, testing and back office work in lower-cost countries
Medium margin
TCS, Infosys, HCLTech, Wipro, the delivery centres of Accenture and the Big Four, and companies' own global capability centres
Lower price per hour, but lower cost too; TCS reported a 25 percent operating margin, excluding one-off items, for its year to March 2026.
Step 6: Run services for years: managed services and outsourcing
Medium margin
IT services firms, Accenture, the Big Four
Steady and recurring; managed services were about half of Accenture's revenue in its year to August 2025.
Step 7: Bill and collect: apply discounts, write off extra hours, collect cash
Margin varies
Finance teams and the partner who owns the client
Realization below 100 percent is price given away after the work is done.
Step 8: Follow-on work: the next phase or the next question for the same client
Fat margin
Partners
The cheapest sale a firm makes, because trust is already there.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

The richest profit sits in scarce judgment sold per project at high rates (strategy, deals, disputes, specialist law) and in large multi-year contracts run at scale from lower-cost countries. Routine work such as basic coding, testing, document review and standard audit steps is where AI and offshore rivals push prices down hardest.

Cost structure(4)

The main costs, each as a share of revenue (the money from sales).

Cost of services (mostly pay for the people who deliver the work): About 68 percent at Accenture[1]
Sales and marketing: About 10 percent at Accenture[1]
General and administrative costs: About 6 percent at Accenture[1]
Operating profit left: About 15 percent at Accenture (14.7 percent reported, 15.6 percent adjusted); about 25 percent at TCS, excluding one-off items[1]

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Operating margin, Accenture (year to August 2025): 14.7 percent reported, 15.6 percent adjusted (excluding business optimization costs)[1]
Operating margin, TCS (year to March 2026): About 25 percent, excluding one-off items[6]
Operating margin, Infosys (year to March 2026): About 21 percent adjusted (20.3 percent reported)[7]
EBITDA margin, average professional services firm in the SPI benchmark (2025): About 10 percent[10]Mostly smaller firms; well below the 15 percent SPI expects of a healthy firm.
Revenue growth, Big Four (latest years): About 3 to 5 percent in local currency[2]Deloitte 3.8 percent to May 2026; PwC, EY and KPMG 2.7 to 5.1 percent in their 2025 years.
India technology industry revenue (year to March 2026): About USD 315 billion, up about 6 percent (a Nasscom estimate)[8]

Typical cases(7)

Case prompts you might hear in this industry.

A consulting firm's revenue is flat but its profit fell 20 percent. Why?
Should an Indian IT services firm move its largest client from billing per person to pricing per outcome?
Should a European strategy firm open an office in Riyadh?
A Big Four firm wants to grow its audit business in Southeast Asia. How?
A law firm's partners want higher profit per partner. What are the options?
How should a consulting firm change its graduate hiring as AI takes over junior tasks?
A client asks for a 15 percent discount on a renewal. Should we accept?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Growing revenue by hiring without checking that the new people will be billed. Check the bench first.
Using the standard rate as the price. Realization after discounts is the price that counts.
Treating AI only as a saving. Under hourly billing it also cuts revenue, so the pricing model has to change too.
Forgetting independence rules, which stop an auditor selling many services to its own audit clients.
Ranking firms by prestige instead of working from the numbers in the case.

What changed, 2024 to 2026(5)

Recent changes a case could turn on.

Growth slowed and benches grew: Deloitte grew 3.8 percent in local currency in its year to May 2026, and firms in the SPI Research benchmark billed only 66.4 percent of available hours in 2025, the lowest in 19 years.[10]
AI became a large business line: Accenture booked USD 5.9 billion of generative AI work in its year to August 2025, TCS passed USD 2.3 billion of annualised AI revenue in early 2026, and Nasscom estimates USD 10 to 12 billion of AI revenue for Indian technology firms in the year to March 2026.[1]
The pyramid is under pressure: AI tools now draft research and slides that juniors used to do, and all four Big Four firms were reported in 2025 to have hired fewer UK graduates in 2024 than in 2023, by about 6 to 29 percent. Firms are moving to fixed, value based and outcome prices so that faster work raises profit instead of cutting revenue.[15]
Indian IT services passed a milestone but slowed: Nasscom estimates the industry crossed about USD 315 billion in the year to March 2026, while TCS's revenue was about USD 30 billion, flat in dollars and down about 2 percent in constant currency, and its headcount fell by about 23,000.[8]
Gulf demand stayed strong but got tougher: the Gulf consulting market was expected to pass USD 8.3 billion in 2025, Saudi Arabia the largest; from 2025 Saudi clients cut budgets, capped fees and tied more pay to results, and in July 2026 Source Global Research cut its forecast for Saudi consulting growth in 2026 from about 13 percent to about 9 to 10 percent.[13]

Players by region(6)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: McKinsey, BCG and Bain (strategy)
Deloitte, PwC, EY and KPMG (the Big Four)
Accenture
IBM Consulting
Capgemini
BDO, Grant Thornton and RSM (audit and advisory)
Europe: Roland Berger (strategy)
Capgemini and Sopra Steria (IT services)
Clifford Chance, Freshfields and Linklaters (law)
Middle East: Global firms' offices in Riyadh, Dubai and Abu Dhabi
Strategic Gears (Saudi consulting)
Elm (Saudi digital services)
Big Four member firms in the Gulf
India: TCS
Infosys
HCLTech
Wipro
Tech Mahindra
Cyril Amarchand Mangaldas and AZB and Partners (law)
Southeast Asia: NCS (Singapore IT services)
FPT (Vietnam IT services)
Global firms' Singapore and Jakarta offices
United States: Booz Allen Hamilton (government consulting)
Cognizant (IT services)
Kirkland and Ellis and Latham and Watkins (law)

Words to know(12)

Linked words have a fuller entry in the glossary.

Utilization (glossary entry): Hours billed to clients divided by hours available to work.
Billing rate: The list price per hour or day for a person.
Realization: The share of the list price the firm actually collects.
Pyramid: The shape of a firm: few partners at the top, many juniors at the base.
Staff to partner ratio: How many people work under each partner; firms call it the leverage ratio.
Bench: People not currently billed to any client.
Time and materials: Pricing where the client pays for every hour worked plus expenses.
Fixed fee: One price for a defined piece of work, whatever the hours.
Value based pricing (glossary entry): A fee linked to the result, such as a share of savings.
Managed services: Running a service for a client for years at an agreed yearly or unit price.
Offshore delivery: Doing work in a lower-cost country, such as India, for a client elsewhere.
Book-to-bill (glossary entry): New contracts signed divided by revenue billed in the same period.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(18)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

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The full lessons behind this brief, with sources and worked cases.

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Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.