View source for External v/s internal consulting. growth of internal consulting

Recognizing a constant need for third-party expertise, some corporations have 
established formalized internal consulting units. Consultants from these units
report to a central consulting division, which then staffs its employees within
different business units in the company for assistance on issues such as corporate
strategy, business development and project management. The consultants remain
deployed with the client for either a set period of time or throughout the duration
of a specific project. Even though everyone technically works for the same
company, the consulting arm acts as an outsider, since its consultants don�t work
for the business units.
Why don�t these corporations hire outside consultancies? One reason why
corporations like having internal consulting groups is cost savings. Internal
consulting groups can be an economical way to obtain a large amount of
consulting help. The firm doesn�t have to pay the exorbitant billing rates; instead,
it can receive the �outsider� opinion for a corporate pay scale. The firm also
benefits from having a dedicated team of experts knowledgeable on the company
and its industry. In addition, having a dedicated internal consulting unit is a smart
way for corporations to market themselves and attract top talent from the outside
consulting ranks. ('''from Vault Career Guide to Consulting''')

Rise of Internal Corporate Consulting Groups <br>
... Added to these approaches are corporations that set up their own internal consulting groups, hiring internal management consultants either from within the corporation or from external firms employees. Many corporations have internal groups of as many as 25 to 30 full-time consultants. <br>

Internal consulting groups are often formed around a number of practice areas, commonly including: organizational development, process management, information technology, design services, training, and development.<br>

Advantages <br>
There are several potential benefits of internal consultants to those who employ them: <br>

If properly managed and empowered, internal consulting groups evaluate engagement on projects in light of the corporation's strategic and tactical objectives. <br>
Often, the internal consultant requires less ramp up time on a project due to familiarity with the corporation, and is able to guide a project through to implementation�-a step that would be too costly if an external consultant were used. <br>
Internal relationship provides opportunities to keep certain corporate information private. <br>
It is likely that the time and materials cost of internal consultants is significantly less than external consultants operating in the same capacity. <br>
Internal consulting positions can be used to recruit and develop potential senior managers of the organization. <br>
Note: Corporations need to be conscious of and consistent with how internal consultant costs are accounted for on both a project and organizational level to evaluate cost effectiveness. <br>

Internal consultants are often uniquely suited to <br>
1.Lead external consulting project teams, or <br>
2.Act as organizational subject matter experts �embedded� with external consulting teams under the direction of organizational management.
A group of internal consultants can closely monitor and work with external consulting firm. This would ensure better delivery, quality, and overall operating relationship. <br>

External firms providing consulting services have a dichotomy in priority. <br>

Disadvantages <br>
The internal consultant may not bring the objectivity to the consulting relationship that an external firm can.
An internal consultant also may not bring to the table best practices from other corporations. A way to mitigate this issue is to recruit experience into the group and/or proactively provide diverse training to internal consultants.
Where the consulting industry is strong and consulting compensation high, it can be difficult to recruit candidates.
It is often difficult to accurately measure the true costs and benefits of an internal consulting group.
When financial times get tough, internal consulting groups that have not effectively demonstrated economic value (costs vs. benefits) are likely to face size reductions or reassignment. ('''from Wikipedia''', http://en.wikipedia.org/wiki/Management_consulting) <br>