During my career I had multiple discussions about the line between bodyshopping & consultancy. Yet “Work The Line” has a really nice post on this.
Some excerpts…
Does the firm have genuine practice areas based on shared intellectual property? A consultancy should have mechanisms for capturing, sharing, and reusing intellectual property in areas of specialized expertise. These mechanisms can be embodied in people (practice leaders), processes (defined practices for knowledge-sharing), and tools (collaborative software, reusable collateral, etc.).
So is there an infrastructure to back up your knowledge workers? As a consultancy firm your key asset is the knowledge of your people, so are the able to share this asset?
Does the firm limit its consultants’ billable time for strategic purposes? A body shop bills as much of its consultants’ time as possible, all the time. In contrast, a consultancy continually invests time in improving its collective knowledge and performance.
Key indicators here are training & the % of people “on the bench”. If people are allocated fulltime towards a customer; how can they be acquire their knowledge? One might say that this is because they are trained on the job, but those are not always the grounds where one can gain much experience in new/expert fields. When spending all your time “on the road” is not allowing the time for reading, communicating and reflection which is essential to maintain quality.
Does the firm measure success in terms of profitability per engagement? This question is closely related to the last two. If a firm’s goal is simply to bill as much as possible, and its preference is to bill for time and materials, it will have no interest in the profitability of individual engagements, and will simply “run the clock” as long as it can. Conversely, if a firm uses its knowledge to deliver high-value fixed-price engagements, it will try to perform engagements as quickly and efficiently as possible, in order to maximize their profitability.
The profit made on project with a fixed price is based upon your knowledge. The more you know, the more efficient you can provide the solution. Where is your motivation when you charge by the hour? Then it’s just a hidden form of interim work (to me).
Does the firm leverage new skills to build higher-level relationships? Over time, a firm builds skills engagement by engagement. It comes in to offer skill A, and picks up skill B in the process. If the firm simply adds these new skills to its list of “things we do,” it is behaving like a body shop. If the firm analyzes, consolidates and leverages these skills into higher-level client relationships, it is behaving like a consultancy.
Do you have many different profile which are being “rented” towards clients, or do you have a specific area where your knowledge dominates? This come close to the question whether or not the firm can distinct one self (as a brand) by encapsulating a specific value proposition.
Conclusion
A body shop bills as much of its consultants’ time as possible, all the time. In contrast, a consultancy continually invests time in improving its collective knowledge and performance.
Karim Vaes 
Body shop or consultancy, neither is bad and both are needed in business today. But all too often, body shops advertise as consultancy firms, both to clients and (potential) resources, and that is the problem. Everybody would gain a lot with a little more clarity (read:honesty)
You’ve got a good point there. Sometimes (?) employees of body shops get deceived by the claim to be consultancy, yet in the end they aren’t provided with the anticipated training. These companies often see training as a cost and forget that the lack of training will diminish the added value that can be brought to the table.
A fair warning for those who step into body shops; be sure to keep your skills up-to-date -yourself-, and to negotiate your own rate (wage) on a regular basis. Your wage should incorporate the costs you make for your own training.
If you start slacking, then you’ll only decrease your own market value. This could be the breeding ground for a social disaster when your job ends. You might suddenly realize that the market has completely shifted, which has rendered your skills useless!
It is actually not ‘sometimes’. Body shopping is a very difficult thing to sell to a professional person. So it is masked as ‘consulting’ nearly 100 % of the time. Very few people can afford to quit jobs after they are in it, so they stick with it to the extent possible. I have not seen any bodyshopper call themselves that in public. They will not easily get business or get people to say if they do. And no, i dont’ believe there is a ‘reason or purpose’ for this. It is exploitation plain and simple. Good post.