Low prices are forcing consultants to shift to asset-based services.

Despite expanding by just 1 per cent to €1.15bn in 2015, Italy’s consulting market marginally outperformed the economy - which grew at 0.8 per cent.

These findings are published in a new report from leading global consulting market analysts, Source Global Research. The report reveals price pressure continues to be a huge factor in the Italian market, and it shows no sign of letting up. In fact, some consultants told Source it’s getting worse as clients grow accustomed to paying very little for consulting work.

This price pressure is forcing consulting firms to carefully consider what steps they can take to resist further erosion of their margins. For consulting firms, avoiding commoditisation is key, and firms are therefore working overtime to figure out how to differentiate themselves and their service offerings from the competition so as to justify a higher rate.

Danilo Viviani, President at Gruppo Coreconsulting commented:

“There’s a very low price point at the moment, and this is constantly being driven lower. I would estimate that prices are around 35% lower than the EU average.”

B.J. Richards, Senior Editor at Source Global Research said:

“To counter ongoing price pressure, consulting firms have begun exploring the possibility of adjusting their delivery models to better suit the low-price environment, and a shift to asset-based services could prove particularly fruitful.

But slow growth in the consulting market is also creating a unique set of talent challenges for consulting firms. When firms aren’t growing, they can provide few opportunities for advancement, and so top talent in Italy is becoming frustrated. This is helping to fuel a trend of rampant turnover as consultants seek greener pastures elsewhere.”

Low value consulting supports growth in financial services…

Financial services remained Italy’s biggest buyer of consulting services in 2015, growing slightly above the market average at 1.6 per cent to €349m. However, the report states much of the work here is highly commoditised and consists of low-value regulatory implementation.

Manufacturing, the second largest Italian consulting industry, grew the fastest - expanding 2.6 per cent to €220m. The report says that this is partly because manufacturing clients are more interested in digitisation than other sectors.

Technology consulting grows twice as fast as the wider market…

Technology was the fastest-growing consulting service line in Italy in 2015, growing more than twice as fast as the overall market - at 2.3 per cent to €254m. Technology projects aren’t confined to just new technology solutions, however, as clients continue to buy traditional IT. Unfortunately, the flip side of this demand in traditional IT is that many clients simply lack the budgets to do anything more exciting - like digitisation projects - which is capping growth for now. As the economy improves and clients find the means to make new investments, Source expects a much greater push toward digitisation and a related drop in legacy systems work over the next few years.

B.J. Richards from Source concluded:

“Consultants are largely optimistic about their prospects for the remainder of 2016, with most saying the market is looking up. Firms are investing in capacity and expertise, and so there’s been a good level of M&A happening with much of the activity aimed at acquiring digitisation skills and capacity. Still, growth remains slow, both in consulting and in the larger economy, and so significant improvement in market conditions is probably still a few years down the road.”

For more information on Source reports contact alice.noyelle@sourceglobalresearch.com or telephone +44 (0)20 3700 5462/ visit www.sourceglobalresearch.com. read more