Strong growth in the consulting industry has positioned 2015 to be a good year – particularly for those focused on the U.K. and U.S. markets, writes Simon Montague, Business Director, Deltek UK.
Yet, as we all know, nothing is free. To achieve success this year, consulting firms must overcome considerable challenges. Here’s a look at what those in the industry can expect.
The Good News
Let’s start with the good news: the UK consulting market grew by 6.6 percent last year, far faster than the economy as a whole, and is set to grow by another 6 percent this year.
This – together with the availability of talent, the amount of revenue each consultant can be expected to bring in and the client’s propensity to buy consulting services – makes the U.K. the most attractive consulting market worldwide, according to Source Information Services. The U.S. isn’t far behind and additional positive results can be found across the globe.
Consultants are also benefiting from growth in a number of other industries. This year pharma, biotech and healthcare are taking a leading role in driving the consulting market with strong requirements for product innovation, growth strategies and regulatory work.
Additionally, clients in both retail and financial services are expected to increase buying consulting services for similar reasons to last year, such as the drive for developing multi-channel routes to market for retail and regulation in financial services. 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. In fact, those providing IT services and strategy consulting should also see an upturn in demand. Overall, this adds up to good news for our clients and many other consulting firms.
Now for the challenges.
First, most 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, even though demand is increasing.
With growing opportunities for high-end, high-margin strategy and/or innovation projects, 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.
All of this translates to resources being stretched across a wide range of disciplines, and difficulty in understanding how to make the most out of a growing marketplace.
Standing Out in the Crowd
To be successful, firms must find a better way to differentiate themselves.
Yet, too many firms say that they are different while resorting to the same platitudes as the competition: 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. Give specifics whenever possible.
Higher-margin work – such as bespoke innovation projects that require senior consultants – is a maturing market place. Solid opportunities remain for this segment, but it will be necessary to adapt business models to suit.
For example, it may be necessary for smaller firms to manage a competitive pool of resources for commoditised services, while reserving a few higher level resources available for more complex projects that will yield greater margin and gain greater attention.
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 in 2015, download our Consulting Industry snapshot.