Recently we took part in the Source for Consulting market update presented by Fiona Czerniawska, Director and Co-Founder of Source for Consulting, and Edward Haigh, Director. The results were from their quarterly buying trends survey.
The results were very varied depending on the type of consulting work done and the type of company. As has always been the case in a recession, the market share of the Big 4 increases and in boom times it decreases. This recession has been no exception; as a group they have seen a market rise of 5% since March of this year. One of the main reasons for their market share increasing is that clients buying consulting services were far more careful about where their money went. It was considered safer to pay a well known company to do the work rather than a smaller boutique firm, even though the latter might do a better job. The risk in that decision is the word ‘might’; as someone said to me earlier this week “no one was ever fired for hiring KPMG”.
Pressure on prices across the whole market seems to have increased; with some firms discounting heavily, the most resilience for rates is at the Partner level. The individual service lines strategy, long considered the ‘sexiest’ area of consulting, has seen a significant decrease with average rates dropping from around £1,700 to closer to £1,200. Since December 2010 rates for HR consulting have been on a continual increase and now averages £1,000.
The service line with the highest percentage of increased business is outsourcing, which has seen a rise of just over 7% since December 2010; conversely to this, improving operation performance has seen a decrease of just over 8%. These figures represent the percentage of total money spent on consulting in the UK that each service line currently has.
Operational firms now have the smallest market share of any major firm type with the Big 4 over 23% ahead. Strategy firms have seen a decrease of 5% which now puts them second from bottom in terms of market share. Specialist firms, having seen a drop of 15% between October 2008 and January 2009 now command the third largest market share at around 17%.
In the future, the survey suggests there will be a 38% increase in the use of specialist firms compared to a 44% decrease in the use of the Big 4. Outsourcing is the largest predicted growing service line with an increase of 35% with improving operation performance, strategy and marketing and selling being the biggest decreases at 35%, 31% and 30% respectively.
If there is one thing we all know about consultancy it’s the speed at which things can change, in reality will these figures be accurate? We will have to wait and see.