Hello and welcome to Smart Consulting Sourcing, the podcast where we dive into the world of consulting procurement to help you source smarter, work better, and achieve greater success. I’m Helene Laffitte, CEO of Consulting Quest, and today, we’re tackling a topic that’s been hiding in plain sight for far too long: Internal Consulting Groups.
Think about it—companies are spending millions, even billions, on external consultants. For the longest time, no one really questioned it. That’s just how things worked. Senior executives brought in big-name consulting firms, and procurement? Well, we were left on the sidelines. But times are changing—and fast. Consulting is no longer an exclusive playground for top management. Procurement teams are stepping up, asking the tough questions, scrutinizing spend, and looking for smarter ways to manage consulting budgets.
And one of the most underutilized strategies? Building an Internal Consulting Group.
Now, I know what you might be thinking: Internal consultants? Sounds like something companies resort to only when external consulting costs spiral out of control. And honestly? That’s often how organizations first approach it—a knee-jerk reaction to cost-cutting. But what if I told you that internal consulting isn’t just about saving money? It’s a powerful strategic asset. When done right, it strengthens institutional knowledge, ensuring that expertise remains within the company rather than being paid for repeatedly. It also serves as a powerful incubator for future business leaders, giving internal talent the opportunity to grow and develop strategic problem-solving skills. And beyond just cost savings, it offers companies greater control over their consulting needs, allowing them to be more intentional in deciding when and how to bring in external expertise.
And here’s the thing—it’s not about eliminating external consultants altogether. Internal consulting groups should be seen as one tool in the broader strategy to optimize spend. So today, we’re going to explore what an internal consulting group really is, why more companies are choosing to invest in them, how they can effectively reduce consulting spend without sacrificing expertise, and, most importantly, what it takes to make them successful.
If you’re in procurement, strategy, or finance, this episode is for you. So grab your coffee, settle in, and let’s get started.
Alright, now that we’ve set the stage, let’s get into it—what exactly is an Internal Consulting Group?
What is an Internal Consulting Group?
An Internal Consulting Group is essentially an in-house team of experts that provides strategic advice, analysis, and problem-solving services, just like external consultants—but without the hefty price tag. Unlike external firms that work on a project-by-project basis and move on, internal consultants stay within the organization, ensuring that knowledge, expertise, and strategic insights are retained and continuously refined.
Why Invest in an In-House Consulting Group?
So why should companies invest in an internal consulting group when they could simply bring in firms like McKinsey, BCG, or Deloitte? The answer lies in three fundamental advantages that internal consulting groups offer: cost efficiency, institutional knowledge, and long-term capability building. Understanding these distinctions is key to recognizing the value they bring to an organization.
Cost Efficiency: External consultants charge anywhere from a few thousand to tens of thousands of dollars per day, per consultant. That adds up quickly, especially for long-term projects. Internal consultants aren’t free, as many organizations implement chargeback models or internal daily fees to maintain profitability, but their cost structure is significantly more favorable. Salaries, margins, and overhead costs are typically lower compared to those of external firms, which means organizations can optimize their spending while still leveraging high-level expertise. Beyond cost, institutional knowledge is a major advantage.
Institutional Knowledge: External consultants bring fresh perspectives, but they typically leave once the project is complete, handing over recommendations without necessarily following through on implementation. Internal consulting teams, on the other hand, don’t just create strategy—they execute it and ensure that solutions aren’t abandoned in a drawer. They become the internal experts on key business challenges, accumulating deep company-specific knowledge that can be applied across projects and departments. Building internal capabilities is another major benefit.
Long-Term Capability Building: External consultants are excellent for short-term expertise and immediate impact, but internal consulting groups create lasting value. They serve as a training ground for future leaders by exposing internal talent to strategic problem-solving and high-impact initiatives. Employees working in these groups develop critical thinking and analytical skills that prepare them for leadership roles within the organization.
Real-World Success Stories
Some companies have mastered the internal consulting model and turned it into a serious competitive advantage.
Siemens Advanta Consulting: Siemens, for example, originally created an internal strategy team, Siemens Management Consulting, to support its own business. It was so successful that it evolved into Siemens Advanta Consulting, a global consulting unit that now works with both Siemens and external clients on digital transformation, strategy, and operations.
BASF Internal Consulting: Similarly, BASF, the global chemical giant, has built an internal consulting powerhouse that handles over 200 projects a year. Their focus is on operational excellence and transformation, tackling challenges like sustainability in transport, supply chain agility, and emission reduction strategies. Instead of always relying on external firms, they keep high-impact work in-house, allowing them to drive change from within while maintaining cost efficiency.
The Strategic Value of Internal Consulting
Internal consulting isn’t just a cost-saving mechanism; it can be a real growth engine. When implemented correctly, it doesn’t just reduce consulting expenses—it creates long-term value, builds institutional expertise, and even has the potential to become a revenue-generating function
Siemens proved that an internal consulting team can evolve beyond its original purpose, expanding its reach and impact across industries. The key is to strike the right balance between internal and external expertise, ensuring that internal teams handle recurring strategic needs while external firms are brought in for specialized, one-off challenges that require a fresh perspective.
Now that we understand what an Internal Consulting Group is and why companies are investing in them, let’s explore how they can help reduce consulting spend without sacrificing expertise.
How Internal Consulting Groups Reduce Consulting Spend Without Sacrificing Expertise?
Reducing consulting spend without sacrificing expertise is a balancing act that many organizations are trying to master. The reality is, the global consulting market is worth over $300 billion, and companies continue to pour massive budgets into external consulting. But here’s what often gets overlooked—a significant portion of that spend can be optimized by leveraging internal consulting capabilities.
The Cost-Saving Potential of Internal Consulting
A well-structured internal consulting group can lead to substantial cost savings. Companies that integrate internal consulting into their overall cost management strategy can reduce their external consulting spend by approximately 20 percent. This is primarily due to lower daily rates, better margins, and, most importantly, stronger follow-through on implementation.
The cost structure of internal consultants is inherently more favorable, as they operate with lower overhead costs, eliminating the high markups that come with external firms. Instead of continuously paying for outside expertise, companies can reinvest in their own talent, ensuring that knowledge stays within the organization.
When to Use Internal vs. External Consulting
That being said, internal consulting is not a one-size-fits-all solution. Some projects still require external consultants, especially those that demand niche expertise or a fresh, outside-in perspective. The key is knowing when to use internal resources and when to bring in external firms. Organizations should develop a structured decision-making framework that evaluates each consulting need based on complexity, required expertise, and long-term value.
For recurring strategic projects that require deep institutional knowledge, internal teams are often the smarter choice. On the other hand, for industry shifts, disruptive market trends, or specialized technical expertise, external consultants may still provide the greatest value.
Maximizing ROI with a Strong Internal Consulting Function
A strong internal consulting function can also enhance ROI by ensuring that consulting investments—whether internal or external—are made with greater precision. Companies with mature internal consulting teams often have better control over project execution, leading to improved outcomes and more efficient use of resources. Since internal teams remain embedded in the organization, they can track project success over time, refine strategies, and adapt solutions as needed, which external consultants rarely have the opportunity to do.
Internal consulting teams are not just about cutting costs; they can actually improve the efficiency and impact of consulting engagements as a whole. By leveraging internal resources for execution and reserving external consultants for high-value, specialized advisory roles, companies can extract more value from every dollar spent. In many cases, internal consultants can absorb knowledge from external firms, ensuring that expertise is transferred and retained within the organization rather than lost when an external engagement ends.
Striking the Right Balance Between Internal and External Consulting
Ultimately, the smartest approach isn’t about choosing between internal or external consulting—it’s about using both strategically. Companies that successfully optimize their consulting spend recognize that internal consulting groups and external firms each have their place. By implementing a structured approach to consulting demand management, businesses can significantly reduce costs while still accessing top-tier expertise when needed. It’s about making consulting work smarter, not just cheaper.
Key Success Factors for an Effective Internal Consulting Group
Creating an Internal Consulting Group is one thing, but making it truly effective is another. Many companies set up internal consulting teams only to see them struggle due to lack of support, unclear scope, or difficulty attracting top talent. To ensure success, there are five key factors that organizations need to get right.
- Leadership Sponsorship & Strategic Alignment
The first is leadership sponsorship and strategic alignment. Without strong backing from senior executives, an internal consulting team will struggle to gain traction. If leadership doesn’t see the value, business units won’t take them seriously, and the best talent won’t want to join.
To secure buy-in, companies need to position internal consulting as a strategic enabler, not just a cost-cutting initiative. Leaders need to understand that an internal consulting group isn’t about replacing external firms—it’s about using them more effectively while building internal capabilities. Presenting a strong business case with data on consulting spend, potential savings, and long-term value creation can help gain executive support.
- Hiring and Retaining the Right Talent
The second success factor is hiring the right talent and retaining expertise. If an internal consulting team lacks credibility, business units will continue relying on external consultants. The challenge is that top-tier consultants are often drawn to the prestige, variety, and compensation of external firms.
To compete, companies must offer compelling career paths, making internal consulting a stepping stone to leadership roles. Offering rotational leadership programs, competitive incentives, and exposure to high-impact projects can attract and retain high performers. A strong internal consulting brand within the organization also helps position the team as a sought-after career move.
- Integrating Internal Consulting into the Broader Consulting Strategy
Another critical element is integrating the internal consulting group into the company’s broader consulting cost optimization strategy. Internal consulting shouldn’t operate in isolation. Instead, it needs to be part of a structured decision-making framework that ensures the right balance between internal and external consulting resources.
Companies should implement demand management processes to determine whether a project is necessary and, if so, whether it should be handled internally or externally. A structured “make-or-buy” decision approach ensures that internal teams focus on high-impact, recurring strategic needs while external firms are engaged for niche expertise or when an outside perspective is needed.
- Defining the Right Scope of Work
Defining the right scope of work is essential. Many internal consulting groups fail because they take on too much or don’t have a clear mandate. Instead of trying to be all things to all departments, they should focus on areas where they can add the most value.
These typically include strategy execution, operational improvements, and transformation initiatives that require ongoing oversight. By defining their scope clearly, internal consulting teams can ensure they have the bandwidth and expertise to make a real impact.
- Leveraging Hybrid Teams
The final success factor is leveraging hybrid teams. The best approach isn’t to choose between internal or external consultants—it’s to use them together strategically. Hybrid teams combine external consulting expertise with internal execution capabilities.
For instance, an external strategy firm can help define a roadmap while an internal project management office ensures successful implementation. Internal consultants should also be actively involved when working with external firms, absorbing knowledge and ensuring that expertise stays within the organization long after the consultants have left.
Making Internal Consulting a Strategic Asset
When these five elements come together, an Internal Consulting Group can become a powerful asset. Leadership support ensures credibility, top-tier talent drives impact, integration into the broader consulting strategy optimizes efficiency, a well-defined scope focuses efforts, and hybrid teams create a balance between internal and external expertise. With the right approach, an Internal Consulting Group can go beyond cost savings to become a true driver of long-term business value and growth.
At the end of the day, internal consulting isn’t just about cutting costs—it’s about making smarter decisions, strengthening internal capabilities, and ensuring that organizations get the most out of their consulting spend. Companies that successfully implement internal consulting groups don’t just optimize costs; they gain a strategic advantage, improve execution, and create a culture of continuous improvement.
So before approving that next big consulting engagement, take a moment to ask: Could this be handled internally? If the answer is yes, then it might be time to start building—or strengthening—your own internal consulting capability.
Take Action Today
If you want to learn more or need guidance in establishing an Internal Consulting Group, we’re here to help. At Consulting Quest, we specialize in transforming consulting procurement and offer a digital solution, Consource.io, to simplify the process. Visit us at consultingquest.com or consource.io, or reach out to me directly at helene@consultingquest.com. Thanks for listening, and until next time, happy sourcing!
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