Siemens, Europe's largest engineering group, has underlined the challenge facing management consultants in the recession by ordering a ban on their use in a move it hopes will save it about €300m ($386m).
Peter Löscher, the German group's chief executive, wrote to managers at the end of last month to say that all contracts with external consultants have to be phased out quickly.
The lightbulbs-to-power stations conglomerate will only use its in-house SMC consultants in future.
Any exceptions to this will need the approval of Mr Löscher or Siemens' chief financial officer and the consultants will need to show that the economic benefit of their work will exceed their costs and that it will fall in this business year.
Siemens hopes to save a "middle three-digit million euro sum", the letter says, through the cancellation of hundreds of contracts with the likes of McKinsey and Accenture as part of a larger cost-cutting drive.
The move is a sign of how many large companies are looking to scale back their use of management consultants. "News like Siemens' is our worst nightmare," said a senior executive at a big international consultancy. "If more big firms did that we would be in a lot of trouble."
Other European groups are similarly reviewing their use of management consultants. An executive at a large industrial group outside Germany said: "Paying consultants is naturally one of the first things that we review and we are trimming already. Maybe it will be slashing soon."
A German carmaker said: "Any non-essential projects are being canned right now and that definitely includes consultants."
Consultant contracts had already been under review at Siemens.
Sham consultant contracts were at the heart of a multi-billion euro bribery scandal and were used to conceal suspicious payments.
That scandal saw Siemens' former chief executive and ex-chairman resign and the group pay more than $1bn in fines.
But Siemens said the ban on external consultants had nothing to do with the scandal and instead fitted with Mr Löscher's drive to cut €1.2bn from administrative costs by 2010.
Siemens historically earns about half as much per employee as its US rival General Electric.
By cutting jobs, work by consultants and improving efficiency, Mr Löscher is hoping to reduce overheads by 10 per cent by 2010 in a move investors have welcomed, but questioned as being ambitious.
