SAMPLE COPY. management consulting market report. Section 1 only. for Europe, Middle East, India and Africa

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1 SAMPLE COPY Section 1 only 2011 management consulting market report for Europe, Middle East, India and Africa

2 Source Information Services Ltd and its agents have used their best efforts in collecting the information published in this report. Source Information Services Ltd does not assume, and hereby disclaims any liability for any loss or damage caused by errors or omissions in this report, whether such errors or omissions result from negligence, accident or other causes. Notice: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electrical or mechanical, without the prior written permission of Source Information Services Ltd. This document is protected by copyright law. It is illegal to copy, fax or any of the contents of this document even for internal use without permission. To purchase additional printed copies, please contact joy.burnford@sourceforconsulting.com or telephone +44 (0)

3 About this report 1 Overall performance of the consulting industry 2 Client trends 3 Trends in consulting services 4 Overview of major markets 5 Analysis by segment 6 Consulting revenue tables 7 Contributors and acknowledgements 8 3

4 Section 1: About this report 1 Foreword The aim of this report is to provide a coherent and integrated analysis of the market for management consulting services serving mid-sized and large companies (those with an annual turnover in excess of 500 million) in Europe, the Middle East, India and Africa. The scale and diversity of these markets create new opportunities for the consulting industry, but they also pose huge challenges. If there is one key message from this report, it is that globalisation will be the defining force in management consulting over the next few years. For example, the restructuring and post-merger integration of financial institutions isn t just a response to regulation but is driven by the need to deliver cross-border economies of scale. In other parts of the private sector, the greatest growth will come from clients that have, or aspire to have, a presence in emerging markets. Already we re seeing increasing demand from manufacturing companies for support in helping them create organisations that genuinely integrate people from across the world. These companies and others are also looking for help in understanding how best to approach new markets. Issues such as these will increase demand for consulting over the next 2-3 years at a time when overall demand in many of the large, traditional markets for consultants is not expected to grow quickly. Moreover, many mid-sized, primarily domestic companies, recognising they need external help, will prefer to work with bigger consulting firms (these are companies that have tended to use very small firms and contractors in the past). Even the public sector is looking further afield at the lessons learned by other countries. But not all consulting firms stand to benefit equally from these opportunities. Our research reveals that multinational companies constitute a country in their own right, sitting above the various national markets and all buying and using consultants in a similar way. As more companies become international, more and more consulting will be bought and done at this level, rather than locally. Some mid-sized firms will evolve with their clients, becoming more international alongside them, but others will find themselves increasingly confined to small, domestic clients. However, big firms can t afford to be complacent: being able to deal effectively with multinational clients won t just be a case of having a network of international offices. Being able to field genuinely integrated teams of people, each of whom is capable of operating in, and knowledgeable about, different geographies, will be crucial to success. We hope that this report, with its combination of analysis and data, will provide a useful and valuable input to both consulting firms and their clients as they find their way around this new competitive landscape. Fiona Czerniawska and Joy Burnford Joint Managing Directors, Source Information Services Ltd 4

5 Contents Section 1: About this report 4 Foreword 4 Methodology 10 Section 2: The overall performance of the consulting industry in 2010 and beyond 15 The consulting landscape in Section 3: Client trends 30 1 The context for consulting: global versus local 32 A crucial source of growth 32 Everyone benefits? 36 The implications for the consulting industry 38 2 The purchase process: procurement versus relationships 41 Multinationals are another country 41 Local variation remains important 42 The implications for the consulting industry 46 3 Resources: internal versus external expertise 48 The (local) rise of internal consulting units 48 The (global) rise of the consultant-manager 49 The implications for the consulting industry 51 4 Delivery: experts versus bodies 55 The remorseless shift towards specialisation 55 Four distinct models 56 The implications for the consulting industry 61 5 Outcome: advice versus implementation 64 The three characteristics of outcome-based competition 64 The implications for the consulting industry 67 6 Margin: price versus value 68 Down but not out 68 The pressures on price continue to grow 71 The implications for the consulting industry 74 Current client buying trends 75 Key market indicators 75 The next six months 76 5

6 Section 4: Trends in consulting services 79 1 Strategy consulting and financing (including M&A) 82 Trends by major sector 86 Trends by major market 88 2 Operational improvement and excellence 90 Trends by major sector 92 3 People-related consulting IT consulting Outsourcing advice Other consulting services 118 Sales and marketing consulting 118 Financial management 121 Risk management 123 Programme management Section 5: Overview of major markets 128 United Kingdom 129 Germany 131 France 133 Spain 135 Italy 137 Benelux 139 Scandinavia 141 Switzerland and Austria 143 Eastern Europe and Russia 145 Middle East 147 India 149 6

7 Section 6: Analysis by segment 151 Segmenting consulting firms and their strategies for growth 152 Segmentation by tier 152 Segmentation by type 153 Strategies for growth 154 Type M firms 156 Specialist above generalist 156 The temptation of diversification 157 Cross-selling: acquired or absorbed 157 Globalisation without tears? 158 Redefining consulting 159 Revenue breakdown Type M firms 160 Type S firms 162 Diversification and globalisation drives divergence 162 Specialise or be acquired? 164 Redefining consulting, rather than strategy 165 Revenue breakdown Type S firms 166 Type P firms 168 Specialise or globalise? 168 Changing the rules 171 Revenue breakdown Type P firms 172 Type A firms 174 Diversification leaves no room for specialisation 174 Revenue breakdown Type A firms 178 Types C and I firms 180 No need to diversify 180 Globalisation 182 The challenges for Type I firms 183 Revenue breakdown Type C firms 185 Revenue breakdown Type I firms 187 Types O and E firms 189 Type O firms 189 Type E firms 189 Growth depends on having the right model 191 Revenue breakdown Type E firms 192 Revenue breakdown Type O firms 194 An overview of the opportunities for growth 195 Talent: constraint to growth or a long-term opportunity? 196 7

8 Section 7: Consulting revenue tables 198 Consulting revenues by service, major market and sector 199 Formulating strategy, by sector in each major market 199 Financing (including M&A), by sector in each major market 200 Improving operational performance, by sector in each major market 201 Managing people, by sector in each major market 202 IT consulting, by sector in each major market 203 Marketing and selling, by sector in each major market 204 Outsourcing advice, by sector in each major market 205 Financial management consulting, by sector in each major market 206 Risk management, by sector in each major market 207 Programme management, by sector in each major market 208 Consulting revenues by service, major market and type of firm 209 Formulating strategy, by type of firm in each major market 209 Financing (including M&A), by type of firm in each major market 210 Improving operational performance, by type of firm in each major market 211 Managing people, by type of firm in each major market 212 IT consulting, by type of firm in each major market 213 Marketing and selling, by type of firm in each major market 214 Outsourcing advice, by type of firm in each major market 215 Financial management consulting, by type of firm in each major market 216 Risk management, by type of firm in each major market 217 Programme management, by type of firm in each major market 218 Consulting revenues by type of firm, major market and sector 219 Type A firms, by sector in each major market 219 Type C firms, by sector in each major market 220 Type E firms, by sector in each major market 221 Type I firms, by sector in each major market 222 Type M firms, by sector in each major market 223 Type O firms, by sector in each major market 224 Type P firms, by sector in each major market 225 Type S firms, by sector in each major market 226 Consulting revenues by type of firm, major market and service 227 Type A firms, by service in each major market 227 Type C firms, by service in each major market 228 Type E firms, by service in each major market 229 Type I firms, by service in each major market 230 Type M firms, by service in each major market 231 Type O firms, by service in each major market 232 Type P firms, by service in each major market 233 Type S firms, by service in each major market Section 8: Contributors and acknowledgements 235 Contributors 236 Acknowledgements 243 What does it all mean for your firm? 245 8

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10 Methodology This report is based on four main sources of data. We interviewed more than 250 people in 150 consulting firms in 35 countries between February and April 2011, giving us a rich and detailed qualitative picture. Many firms also made available data about their business and its split by country, sector and service. We supplemented this quantitative data with our own estimates for a further 150 consulting firms with more than 50 consultants. Taken together, this has allowed us to develop a detailed, bottomup model of the consulting industry across Europe, Middle East, India and Africa and it is this model which is the source of all the market sizing data in the report. 1 The fourth source of data is our Quarterly Buying Trends in Management Consulting report which illustrates how multinational companies use of consultants is likely to change in the short term and which types of consulting services and which types of firm will see the strongest demand. Almost 50 major buyers of consulting services contributed to this survey between January and March This combination of qualitative and quantitative data has allowed us to create a rich and detailed analysis of the consulting market. There are, though, no standard sources or definitions of data within countries let alone between them, with the inevitable consequence that some parts of the report have a more robust quantitative underpinning than others. We are confident that the richness of the qualitative data, combined with Source s unparalleled industry expertise, means that our analysis fairly and accurately reflects the state of the market. This report focuses principally on consulting done by mid- and large-sized consulting firms (those with more than 50 consultants) for mid- and large-sized clients (those with an annual turnover in excess of 500 million) in the major consulting markets in Europe, the Middle East, India and Africa. It therefore reflects the addressable market for most mid-and large-sized consulting firms as most would not seek, nor be able, to compete with very small firms and/or freelance consultants. It is not, however, the entire market. Tables of detailed data can be found towards the end of the report, in Section 7. A list of the people quoted, and their job titles, is given at the very end of this report. Because of the sheer numbers of comments, their job titles have only been included in the main text where it is relevant. 10

11 Figure 1.1: The scope of this report Sectors Manufacturing Automotive Consumer products Pharma and biotech Other manufacturing Financial services Technology, media and telecoms Services Energy, natural resources and utilities Public sector Other Banking and capital markets Insurance Other financial services Telecoms Media and entertainment Retail and distribution Transportation Healthcare (private and public) Other services Consulting services Managing people HR strategy and effectiveness Benefits, compensation and pensions Change management Internal comms Organisational design and culture Stakeholder management Team effectiveness and collaboration Leadership and governance Performance management Talent management / training and development Formulating strategy Business and financial modelling Corporate re-structuring Corporate recovery and turnaround Corporate strategy Market analysis and strategy Market research Policy formulation Strategic sourcing / offshoring strategy Improving operational performance Business continuity and recovery Knowledge management Lean and Six Sigma Property and estate management Quality and performance management Supply chain management Cost-cutting Financial management and control Innovation Post-M&A integration Process design and re-engineering Procurement / purchasing Research and development Benchmarking Distribution strategy Environmental, sustainability and CSR Operational review 11

12 Major markets Risk management Marketing and Selling Programme management Outsourcing advice Financing Financial management consulting IT Consulting UK Germany France Spain Italy Benelux Scandinavia Switzerland / Austria Operational risk IT risk Programme risk New product development Branding Customer service Marketing and channel management Customer relationship management Pricing Sales force effectiveness Category management Sales and distribution planning Project and programme management (eg where consulting firm has been managed to run a specific project which it is otherwise not involved in) HR outsourcing advice IT outsourcing advice Finance and administration outsourcing advice Business process outsourcing advice Shared services advice Due diligence and valuation Mergers and acquisitions Infrastructure/asset financing and management, PFI Budgeting/ financial planning process Responding to regulation Finance function Application of new technology Hardware / software selection ERP consulting IT training IT design and build IT strategy, planning and review IT testing and integration Management information and business intelligence Technology and security risk services Hardware / software and systems Implementation Requirements definition Web and internet consulting Belgium Luxembourg Netherlands Denmark Finland Norway Sweden Austria Switzerland 1 12

13 Eastern Europe and Russia Middle East India Belarus Bulgaria Czech Republic Estonia Georgia Hungary Latvia Lithuania Moldova Poland Romania Russian Federation Slovakia Ukraine Bahrain Egypt Iran Iraq Israel Jordan Kuwait Lebanon Oman Palestinian Authority Qatar Saudi Arabia Syria UAE Yemen In addition to these parameters, we have also segmented consulting firms, primarily into eight groups (Figure 1.2). These segments reflect the services offered by firms alongside consulting and acknowledge that many of the critical dynamics of this industry can only be understood in relation to other, non-consulting services. This segmentation is explained and analysed further below, in Section 6. From time to time there are slight discrepancies in charts included in the report; unless otherwise stated, these are due to rounding. 13

14 Figure 1.2 Segmentation classification of consulting firms Type M firms provide management consulting services only Type S firms provide consulting on strategic decisions and operations, alongside M&A-related work Type P firms provide consulting on people-related issues, but also investment advice, risk management and, in some cases, HR outsourcing Type A firms provide management consulting, accounting, tax and corporate advisory services Type C firms offer a combined range of services from management and IT consulting through to outsourcing Type I firms provide both management and IT consulting Type E firms provide management consulting alongside civil engineering and project management Type O firms offer a combination of management consulting services plus outsourcing / managed services 1 other services Type I Type C Type P Consulting Type M Type O other services Type A Type S Type E other services 14

15 Information about the rest of the report You ll find the detail of what we cover in the contents pages at the front of this report, and we ve provided an overview of what you ll find in each section below, but if you d like more information about the content of the report at any point, please telephone Edward Haigh on +44 (0) or edward.haigh@sourceforconsulting.com For more information about the cost of the report, or to order your copy now, please telephone Alice Noyelle on +44 (0) or alice.noyelle@sourceforconsulting.com An overview of each of the following sections of this report Section 2: The overall performance of the consulting industry in 2010 and beyond We start the main body of our report by providing an overview of the state of the consulting market as it emerges from recession. Taking each major market across the region in turn, we illustrate the often stark differences that exist between one country and the next; differences that immediately dispel any notion that the EMEIA region can be treated as an homogenous whole. In doing so we also provide the big numbers which show the size of the market in each country, including what we believe to be the first ever breakdown of the size of the markets in the individual countries of Eastern Europe and the Middle East. These are supported by quantitative analysis of the pan-emeia market by sector, service and consulting firm segment. Finally, we offer an at-a-glance overview of the prospects for growth (in 2011, 2012 and 2013) by major market and, for each of those, by sector and service. 15

16 Management Consulting Market Report 2011 Section 3: Client trends This section of the report focuses on six major trends amongst clients (buyers of consulting services) which, we believe, will determine the size and composition of the EMEIA marketplace over the next three years, if not longer: 1. Context: global versus local 2. Purchase: procurement versus relationships 3. Resources: internal versus external expertise 4. Delivery: experts versus bodies 5. Outcome: advice versus implementation 6. Margin: price versus value None of these originated with the financial crisis, but most have been accelerated or re-shaped by it. They are the fault-lines of the consulting industry: along them run the tensions that will shape its landscape. Each is a continuum and the point at which post-recession clients settle something that may vary country by country, even client by client has profound implications for consulting firms. All are inter-related. Section 4: Trends in consulting services This section of the report examines how ten consulting services have performed over the last few years. Of these ten services, four stand out: strategy, operational improvement, IT consulting and people/change. The vast majority of consulting work takes place in the nexus of these four, increasingly over-lapping areas. Between them, they account for 72% of demand among middle-tier and large clients. However, even these biggest services have distinctive profiles which are important when analysing them on an international basis. Some services, such as IT consulting, strategy and outsourcing advice are relatively similar services across all geographies: although we do discuss some regional variations here, these are not as significant as they are for say marketing and selling or people and change consulting. In some services marketing and selling, M&A and, increasingly, strategy the variation by sector is much more important and we have tried to reflect this in our commentary. 16

17 Section 5: Trends by major market This section of the report contains a series of infographics for each major consulting market, covering a range of macro-economic and consulting market indicators to help readers build their understanding of the industry in each market. Amongst other things, they contain information about: - The size of the consulting market - How the consulting market breaks down by sector, service and segment - The number of Fortune 2000 companies headquartered - A breakdown of the private sector - The size of the public sector, and the size of government debt - Current levels of inward investment - The degree to which demographics are changing - GDP growth 17

18 Section 6: Analysis by segment In this section of the report, our attention switches from a client and market perspective to focus on consulting firms and how they have been, or will be, affected by changes in what clients buy and how they buy it. After an introductory section which looks at how best to segment the consulting industry and what the broad options for growth are, we look in detail at different groups of firm and assess the extent to which they will be able to exploit the opportunities and minimise the threats they face, based both on a reading of the market as it stands in 2011, and on our expectations for the next three years. A final section summarises our conclusions and examines the one overriding barrier to growth in the current market: resources. Section 7: Consulting revenue tables Finally, the section for anyone who wants the numbers. We provide around 30 pages of tables showing consulting revenues by: - Service, major market and sector - Service, major market and type of firm - Type of firm, major market and sector - Type of firm, major market and service Section 8: Contributors and acknowledgements This section of the report contains the names, job titles, companies, countries and website addresses of around 250 people from 150 companies that contributed to this report from Europe, Middle East, India and Africa. For more information about the cost of the report, or to order your copy now, please telephone Alice Noyelle on +44 (0) or alice.noyelle@sourceforconsulting.com 18

19 ORDER FORM 2011 Management Consulting Market Report for Europe, Middle East, India and Africa Contact details: Your name: Job title: Your company: Address: (for delivery) Country: Telephone: address: Invoicing details: Purchase order number/reference (required): Invoicing address: (if different from delivery address) Country: VAT number: (if registered in UK or other EC country) Payment details: Organisations that contributed to the report: Other organisations: 7,500 + VAT 15,000 + VAT Cost of report VAT at 20% (VAT does not apply if your business belongs outside the UK; please ensure you provide EC VAT registration number or other evidence) Total to be paid o I enclose a cheque for the total amount due (made payable to Source Information Services Ltd) o My company already has an account with Source, please invoice us (payment due within 30 days) Order confirmation I confirm that: i) I am authorised to place this order on behalf of my organisation; ii) I understand that the report is only for internal use within my organisation and may not be re-produced, in any way, in full or in part for use outside of my organisation without prior written permission from joy.burnford@sourceforconsulting.com; iii) I accept Source Information Services Limited's standard terms and conditions ( insofar as they apply to purchase of this report; and iv) I have provided a purchase order number or reference above. Signed: Name: Date: The report is in English only and will be available from 23rd June You will receive two printed copies and an electronic copy for unrestricted use within your organisation. If you require additional printed copies, please contact alice.noyelle@sourceforconsulting.com; Reports will be dispatched after receipt of payment (or for existing account holders, a purchase order number). Please allow three working days for delivery of printed copies (delivery outside mainland UK may take longer). Please send or scan the completed and signed order form (with payment if applicable) to Joy Burnford: By post: Source Information Services Ltd, 288 Bishopsgate, London, EC2M 4QP By joy.burnford@sourceforconsulting.com For all other enquiries, please telephone Alice Noyelle on +44 (0) Source Information Services Ltd Registered office: 26 Aldebert Terrace, London, SW8 1BJ. Registered in England & Wales, number

20 What does it all mean for your firm? In our experience, reports of this nature invariably give rise to as many questions as they provide answers. In part, that can be attributed to the simple fact that it is virtually impossible to cover every nuance of every area of every market. Somebody, no matter how hard you try, will always be left disappointed. But much is down to the fact that what we haven t been able to do, in this report, is talk about the performance of individual firms against the performance of the markets in which they operate. That s the next step. Provided data about consulting revenues either has already been, or can be, provided by your firm, we can produce a bespoke report and presentation which provides the following: The overall strengths and weaknesses of your firm in relation to the total market, and to your segment of the market in particular Information about your share of the market by sector: o o Against total by country Against segment, in total and by country Information about your share of the market by consulting service: o o Against total by country Against segment, in total and by country For more information, or to order your copy of this bespoke report, please contact Julie Cleasby on +44 (0) or julie.cleasby@sourceforconsulting.com. Please note a number of firms have already ordered copies of this bespoke report and lead times may become greater as more firms place orders: early ordering is highly recommended. 20

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