Spotlight on State and Local Strategic Consulting, Business Management and Financial Services
Professional and financial services represents a broad range of unique industries within state, local and education (SLED) government purchasing – which as a group are growing faster than average and have strong long-term potential. In this article, we examine three of the top segments using findings from our recent industry profile analysis as well as our SLED Professional Services forecast report to briefly summarize the most relevant, useful insights for vendors and contractors.
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Defining the Three Segments
The three major professional services segments profiled below – Strategic Consulting, Business Management and Financial Services – are defined using GovWin's proprietary Smart Tags, which refer to specific products and services. While there were other segments such as legal and marketing, these three make up the majority of bids and spending in the SLED marketplace.
Based on our research, the professional and financial services market more than doubled in size from FY 1997 to FY 2018 – growing at around twice the rate of inflation from $18.8 billion to $49.6 billion in total spending (4.7% CAGR). It is estimated to have reached $52 billion in FY 2019 prior to the impacts of the pandemic-related recession (which mainly affected one quarter of FY 2020 since it ends in June ‘20). In terms of annual volume of bids and RFPs issued, the market grew from 23,728 bids in calendar year 2014 to 25,835 in 2019 – an average annual rate of 1.7%, more than double the average for all SLED market segments of 0.6%.
The following table profiles these three key segments in terms of level of government served, and highlights the 1st, 2nd and 3rd highest ranked levels for each. City government was by far the top buyer type, ranging from 31% to 40% of all bids and RFPs (strongest for strategic consulting). State government was a distant second – however, with generally higher average contract values, its true share of the market will be greater than these figures suggest. State government was strongest as a buyer group for business management. With the complexities of their commercial nature and need to manage assets and equipment, special districts such as ports, utilities and transit entities were a frequent buyer of financial-related services.
Below you can find specific summaries of these three key segments, plus a number of key trends applicable to each one.
Strategic-level advisory services focused on high-level priorities, changes and planning. Services in this category include program and policy planning and development, organizational reviews or studies and high-level initiatives focused on assessing current environments/ circumstances.
Industry trends for Strategic Consulting include:
- A more competitive landscape for service providers
- A few dominant global consultants are equipped to bid on every project
- However, opportunities for smaller firms specializing in niche areas
- With the pandemic, state and local governments have sought assistance with state reopening plans, supply management and healthcare response
Tactical or operational services concerned with the implementation, management and administration of various processes, initiatives and programs. Services in this category include project or program management, process/change oversight and implementation, performance monitoring and reporting.
Industry trends for Business Management include:
- Automation and integration make processes more efficient and save time
- These address higher-value goals, not just day-to-day tasks
- Automation helps with communication and coordination between layers of the vendor’s staff and operations
- Some impacts on spending from pandemic but demand is resilient
- Further automation is likely to incorporate cost savings, efficiency, agility and adapt to a remote workforce
Services specifically in place to address financial needs. Although these may overlap with the other categories, these services directly affect and work with public finances. Services in this category include financial auditing, accounting, banking, billing, debt collection, electronic payment, asset management, retirement, loans, payroll processing, tax services, etc.
Industry trends for Financial Services include:
- Governments are interested in more innovative financial plans for their workforce, aging workers, ways to bring in retirement age workers, etc.
- They are rethinking how to prepare and manage budgets, using a more process-based strategy that relies on data and evidence-based decisions to evaluate how money is spent
- Agencies are starting to gain ground regarding incorrect or fraudulent payments, working to prevent funds from being erroneously spent in the first place
Future Expectations and Conclusions
Our forecast for spending in these areas calls for stability through FY 2023 following the recent increase from FY 2018 to FY 2019. A decrease of 4% is expected for FY 2021 (which begins in July ‘20) in the aftermath of the pandemic-related recession. FY 2022 shows a very slight additional decrease, leading to a slight gain in FY 2023. Helping to smooth out the trend are certain types of consulting and services that are critical to planning and decision-making during times of growth as well as decline. In other areas of professional services contracting, discretionary purchases can be more easily delayed or cancelled during periods of uncertainty and fiscal stress.
The best services providers in the SLED market are able to identify and manage relevant opportunities in their particular niche with a comprehensive and cost-effective approach. There are other types of professional and financial services not profiled here such as legal and marketing/advertising, which we also provide access to in our full line of subscription options.
In addition to our Smart Tags that pinpoint very specific types of services, GovWin offers Tracked Opportunities for professional services and IT companies pursuing SLED business, where our analysts track the leads for you, from pre-RFP to post-award. You can learn more about this by attending our on-demand webinar.
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