Challenges And Opportunities For Consulting Firms In 2015
Last year, I published a blog about the opportunities and growth in the UK consulting market. Well, it’s been 12 months and it’s time for an update. In this blog, I’ll be focusing primarily on the UK market again but will highlight some details of global opportunities too.
Again, in 2015 there’s plenty of good news for consulting firms, particularly those focused on the UK and US markets. Growth in the industry has been strong, stronger even than in 2013 and this has set up 2015 to be a particularly good year. Consulting firms should be looking to reap the benefits. Yet, with the good news comes some consequences and there are still considerable challenges to be overcome in the year ahead.
Industry Snapshot 2017 Update
The Good News For Consulting Firms
Let’s start with the good news.
The UK consulting market grew by 6.6% last year, far faster than the economy as a whole, and is set to grow by another 6% this year. This, together with the availability of talent, the amount of revenue each consultant can be expected to bring in and the clients propensity to buy consulting services makes the UK the most attractive consulting market worldwide according to Source Information Services. The US isn’t far behind, and in general positive results can be found across the globe.
Growth in the life sciences industry is also filtering through to consultants. This year we can see that pharma, biotech and healthcare will take a leading role in driving the consulting market forward with strong requirements for product innovation, growth strategies and regulatory work. It is also expected that clients in both retail and financial services will increase buying for consulting for similar reasons to last year. Regulation within financial services requires particular skills that can be provided by the right consulting organisations, whereas within retail the drive towards digital and multichannel commerce continues to be a big driver.
However, it’s not just industry specific requirements that are driving growth – those providing IT services, and strategy consulting should also see an upturn in demand. Overall, it’s very good news for our clients and for many other consulting firms.
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The Challenges Ahead
Now for the challenges.
Firstly, most of the growth in the market was driven by the big four consulting firms, which were very active in acquiring companies. These firms have the opportunity to pitch themselves as a one-stop shop, and as such can win work at every level of the market. There are also increasing numbers of smaller firms leading to a fiercely competitive market, particularly for point solutions.
Certain services where specific skill sets are required to fill a gap in the client’s capability are becoming increasingly commoditised. This is leading to price pressure on this part of the market even though demand is increasing. The most successful firms will find a better way to differentiate themselves. Yet, too many firms say that they are different from others whilst still saying that “they get to know their customers first”, and “understand what customers really want”. Communicating why you are truly different will be the key.
Higher margin work such as bespoke projects aimed at finding a new way of doing business or innovating, that require senior consultants is a maturing market place. There are solid opportunities to provide high-end services to this segment yet, it will be necessary to adapt business models to suit. Many consulting firms are struggling to work out how to service both ends of the market whilst keeping consultants busy, and keeping the right talent and skills in house.
Finding Success In 2015
To really take advantage of this growing consulting market, the best firms will find a way to overcome these challenges, focus on the right sectors and services, and adapt to the right business model.
To learn more about the challenges and opportunities for Consulting firms, download our free Consulting Industry snapshot. (This link has been updated with the 2017 version)
Management Consulting Industry Snapshot (2017 Update)