sample COPY Consulting Market Programme The UK consulting market in 2013 Including market sizing data, growth rates, current market trends and forecasts
Contents Executive summary 4 Methodology 5 Contributors 6 Introduction 7 Overview 9 The UK consulting market in 2012 9 Drivers of consulting 10 Pace and expertise 10 Validation 10 Staff substitution and flexible resources 10 Client priorities in 2012 11 Overall prospects for the consulting market in 2013-14 15 What matters? 16 Sectors 19 Financial services 21 Publicly-funded organisations 24 Manufacturing 26 Technology, media and telecoms 28 Services 30 Energy and resources 32 Retail 34 Public and private healthcare 36 Pharma and biotech 38 Services 39 Technology 40 Strategy 44 Operational improvement 48 Financial management and risk 52 HR and change management 54 Programme management 56 Marketing and selling 58 2 SAMPLE COPY Source Information Services Ltd 2013
Opportunities for growth 60 Delivering outcomes, not just ideas 60 From agility to collaboration 60 Knowledge transfer 2.0 62 Globalisation 62 Transformation 63 Increasing your market share 64 Barriers to growth the key challenges in the market 67 Ever more demanding clients 67 Supply-side issues 69 Performance by segment 72 Overview of the market by segment 73 The characteristics of the best firms 74 How do the best firms perform? 74 Looking for more innovative resourcing 76 Segment of one? 76 Big Four firms (Type A) 78 Technology firms (Type T firms) 80 Strategy firms (Type S firms) 82 HR firms (Type P firms) 84 Source Information Services Ltd 2013 SAMPLE COPY 3
Methodology Our report is based on two major sources of primary data: Clients of consulting firms: We surveyed and interviewed about 115 senior (typically C-suite) end users of consulting services across the UK. The majority (90%) worked for private sector organisations, many of which were multinationals. The remaining 10% worked in various public sector organisations. For the sake of simplicity, and to protect the identity of clients who wished to remain anonymous, we have attributed every client quote to the director of a function (including describing CEOs, Managing Directors and Chairpersons as strategy directors ). This is a fair reflection of the seniority of the majority of people to whom we spoke, and saves us revealing job titles that might help someone to identify the individual. Anonymity is important when it comes to client interviews because without it clients are, quite understandably, a lot more guarded and don t always speak their minds as freely as they do when they know nothing they say will be attributed to them Consulting firms: Our definition of management consulting includes a broad range of business advisory services, but excludes: tax advisory; audit; the implementation of IT systems; the delivery of outsourced/offshored services; and HR compensation/ benefits administration and technology. Where mergers and acquisitions work is concerned, consulting on deals is included (under strategy), but corporate finance fees on deals themselves are generally not included although it is not always straightforward to separate the two. The quantitative data contained in this report focuses on consulting done by mid-sized and large-sized consulting firms (those with more than 50 consultants) and typically includes work they have carried out for mid- and large-sized clients. It therefore reflects the addressable market for the majority of mid- and large-sized consulting firms, as most would not seek or be able to compete with very small firms and/or freelance consultants. We should emphasise that there are no standard sources of definitions of data within geographies let alone between them. We are, however, confident that the richness of our qualitative data, combined with Source s unparalleled industry expertise, means that our analysis fairly and accurately reflects the state of the market. We interviewed over 30 very senior (typically the most senior person either in the region or in their country) consultants from most of the leading consulting firms in the region and many smaller regional and local specialists. Our model (which we use to size the industry and its growth rates) is based on data from about 120 consulting firms. 5 SAMPLE COPY Source Information Services Ltd 2013
Contributors We are extremely grateful to all the people we spoke to make this report possible. Below is a list of the individuals that have contributed from consulting firms (all clients remain anonymous): Name Job title Firm Adrian Edwards EMEIA Advisory Markets Leader ernst & Young Aidan Brennan Global Head of Management Consulting kpmg Aimie Chapple Managing Director UKI accenture Andrew Hooke Chief Operating Officer PA Consulting Group Ashley Unwin Managing Partner UK & Central Cluster PwC Consulting Practice, Executive Board Member Brandon Bichler Partner Infosys Chris Beer senior Director Investance UK Chris Wakerley, MBE Managing Director Boxwood Craig Dalton Country Manager solving Efeso David Allen International Consulting Operations Leader navigant David Krucik london Managing Partner oc&c Strategy Consultants Harry Gaskill Head of Advisory, UK & Ireland ernst & Young Harry McDermott Partner Hudson & Yorke Ian Symes general Manager UK & Ireland right Management James Brown Partner simon-kucher & Partners John O'Brien executive Vice President Hitachi Consulting UK Lee Timmins senior Vice President, Consulting atos Consulting Lesley Wilkin Managing Director UKI Hay Group Luca Stoppino UK and Ireland Managing Director solving Efeso Melba Foggo Vice President CGI Business Consulting, UK Michael Mahony Partner the Berkeley Partnership Mike Hunter Vice President, Head of Consulting Europe Cognizant Business Consulting Mike Mathias Consulting Head for UK/Europe tcs Nadun Muthukumarana Partner, Head of Industry Consulting CSC Nick Stagg Chairman and Chief Executive Management Consulting Group Niels Korsholm Group Executive Vice President Devoteam Group Peter Schurau CEO Europe Capco Phil Dunne Partner a.t. Kearney Richard Squire Managing Partner Crossbridge Richard Waterer Managing Director, UK and Ireland Marsh Risk Consulting Roop Singh Vice President & Americas/Europe/JAPAC Head Wipro Consulting Services Stefan Spohr Partner & Regional Leader UK / Ireland BearingPoint Source Information Services Ltd 2013 SAMPLE COPY 6
Technology, media and telecoms UK highlights By comparison with the rest of Europe where it suffered substantially in 2012 (it was down 2% in France and 3% in the Benelux), TMT consulting in the UK has been surprisingly strong, clocking a 1% improvement on 2011. Whilst we generally heard very little about the effect of the summer Olympics in London on the consulting market, one interviewee commented that the games provided a boost in this sector. And indeed you would expect the tech sponsors of the event to complete the projects directly related to the competition and finally invoice them after long years of preparation. Also helping consulting demand was a more active MVNO/MVNE scene in the UK, with brand owners looking to widen their share of the consumer wallet, and the launch of 4G by Everything Everywhere in October 2012. There were also some notable transactions, for example Cable&Wireless being absorbed by Vodafone in the summer. This led to projects in business casing, network and operation design as well as product development. Financial services Publicly-funded organisations Manufacturing Technology, media and telecoms Services Market size 549m ( 633m) Growth 2011-12 1.1 % The industry is not doing well though with Energy and to -15% companies such as -5 HP to and -10% IBM cutting resources 0 to -5% staff levels and mobile operators under threat of commoditisation. This leaves us with uncertain growth prospects for 2013. A substantial revenue stream could emerge, for the right consulting firms, as telcos and high tech companies harness the opportunities presented to them by the wealth of data they hold on their customers. But it is unclear at this point how this can be monetised effectively. Retail Public and private healthcare Pharma and biotech Growth prospects 2013-14 Low 0 to 5 % o 15% 28 5 to 10% SAMPLE COPY 0 to 5% Source Information Services Ltd 2013
Some of our biggest contracts have been in the telecoms space. Mike Mathias, TCS Many telecoms and high-tech companies are owned by overseas parents, which means they re buying less consulting here in the UK. Harry Gaskell, Ernst & Young We re strong in telco in the UK. One of our biggest clients, Vodafone, is reducing the number of consultants it works with and we re fortunate to be one of the ones that remain. If you can help them cutting costs and improving their performance by getting more for less, there s still quite a big market in the telco industry. Niels Korsholm, Devoteam Group Telecoms and high-tech has interesting opportunities. Clients have huge resources of data which could be used and the challenge at the moment is to figure out how to use it. The other thing is that people are expecting a lot to be free, so there is a question about the business model too. AimIe Chapple, Accenture Technology, media and telecoms global view Compared to most other sectors, those in the technology, media and telecoms space are slightly more likely to be living with official edicts requiring them to reduce the amount they use consultants. Technology, cost cutting and growth will certainly drive demand, but the overall level of activity here is lower than elsewhere. TMT companies are more likely to use consultants to improve their technology or to help identify new opportunities for growth than they are to cut costs, but the difference is not vast. The prevalence of other initiatives are likely to be either just above or just below average, the principal exception being M&A (clients don t expect to be doing much of this in 2013). Risk, cultural change and reacting to a new executive agenda are also all areas where TMT companies willingness to involve consultants is less than most other sectors. Source Information Services Ltd 2013 SAMPLE COPY 29
Programme management UK highlights Programme management fared worst of any area of consulting in 2012 with an average growth of just 0.8%, a third of the UK average. But there s exceptionally wide diversity of performance here. Programme management revenues held up for the more complex types of assignments, where expert consultants, with both relevant industry knowledge and strong track-record, could add value. Market size 401m ( 462m) Growth 2011-12 For more generic requirements, especially those around the programme management office, clients increasingly say they have the skills they need in-house and this depressed demand, particularly in the public sector. The prospects for the future look more promising, perhaps because clients, now more stretched internally, are again turning to external support in this area. Only 26% of clients believe they will cut spend in this area further in 2013. However, if past experience is anything to go by, a good part of the work will end up with contractors, Technology Strategy Operational improvement Financial management and risk to -15% rather than with consulting -5 to -10% firms. 0 to -5% HR and change management Programme management 0.8 % Marketing and selling Growth prospects 2013-14 Low 0 to 5 % o 15% 5 to 10% 0 to 5% 56 SAMPLE COPY Source Information Services Ltd 2013
In 2012, we saw more assurance work coming through on largescale programmes. The clients were looking for short, high-value interventions that made a real difference. Michael Mahony, The Berkeley Partnership In the future we ll be using consultants more for capacity we re quite lean these days leanness is here to stay but still looking to embed skills in permanent staff problem is that traditional HR skills don t include programme management and that s a reflection of how the HR role is evolving we re therefore moving from HR specialists to more generalist firms because we want access to those broader project management skills. HR director, services sector We are very operational and don't have lots of people with MBAs and project management training. So if we need expertise, we hire it in. Finance director, services sector Programme management global view This area of consulting sits in the middle of our predictions for 2013, reflecting average levels of expected growth. Demand is expected to be strong in the energy and resources sector, much less so in financial services and the technology, media and telecoms sectors. What we may be seeing here is increasing polarisation between the two essential components of programme management consulting: the high-end, high-margin expertise involved in taking complex projects to a successful conclusion, and the commoditised programme management office (PMO) space. We re putting more and more money into programmes now, commented the COO of a bank. We aim to do as much of the work ourselves as we can, but if we re not experienced enough especially in very difficult programmes then we ll bring help in. It may be that financial services, manufacturing and publicly-funded organisations made greater use of PMO-level consulting and are now looking to reduce this. The services sector may already have been through this change We set up a PMO but it was expensive for what we got; we re now using in-house people, was the view of a CFO in the services sector and the energy sector, because of its predisposition to use consultants in general, hasn t yet reached it. The picture by function suggests that the greatest and most consistent growth in demand will come from clients in a general management position; other functional heads, perhaps because they think their own staff can now set up and run the PMO function, see fewer opportunities. Source Information Services Ltd 2013 SAMPLE COPY 57
A Big Four firms (Type A) Type A Type T Type S Type P A T S P Growth 2011-12 6 % Market size 1,780m 7 ( 2,052m) Even their enemies concede that the major accounting firms have been growing faster than the market. The Big Four are doing very well and making lots of acquisitions, admitted one strategy consultant we spoke to. It s tempting to attribute this to the business model of these firms which seems especially well suited to the UK market generalist, rather than specialist, strong global coverage (if not always a global mindset), the scale and resources to help implement. But our research suggests another factor: generally high levels of client satisfaction around the 80% mark - awarded by clients in our survey, as shown in Figure 11. For some of the other firms, this is a superb opportunity for fruitful collaboration, with clear delineation of roles. But for most firms, it s a threat, especially considering the track-record of M&A of the Big Four. Of the four organisations, firm 1 had more mentions, increasing the confidence we can place in the results (although it s important to note that this is not a sign that the firm is bigger than the others, it s simply a reflection of the experience of those we surveyed). Clients were generally very positive about their experience, particularly highlighting a willingness to transfer skills to, and work collaboratively with, clients own staff. This is how one operations director in a financial services company put it: They took the learning from elsewhere and have been proactive about seeking opportunities to apply it here. Very high level of delivery focused, practical applied piece of work to different part of business over and above what we expected. But, compared to the remaining three of the Big Four, firm 1 tend to be used in smallerscale projects and are seen, in the UK, more in the mould of a traditional consultancy. Firm 1 is more traditional and provide short sharp consulting such as benchmarking in a specific area, said the IT director in the services sector. Firm 2 received almost as many mentions as firm 1 and we heard clients praising the firm s portfolio of services, something that s particularly important in a UK context. Firm 2 has breadth across the world. They can take ideas from one situation and apply them in another, commented a strategy director in the services sector. But clients criticised what they saw to be an over-aggressive approach to sales, They put all their best resource on, which was very good, but it became like a billing machine, was the view of one HR director in the energy and resources sector. Firm 3 was praised for the quality of its people, but not more so compared to the other Big Four. What really stood out, however, was the account management capability of the firm: We very rarely have an issue with the people, said the operations director of a 7 Figures here represent those for the Type A segment as a whole, of which the Big Four are one part. In reality, though, these are virtually one and the same. 78 SAMPLE COPY Source Information Services Ltd 2013
services company. Firm 3 s teams are pretty good in terms of industry knowledge and are very enthusiastic people. The day-to-day relationship with firm 3 account team is very good. What concerns we picked up from the client feedback were mostly those that go with the Big Four business model, rather than anything specific to firm 3. This was true, for example, of the perceived focus on large-scale projects, and was in contrast with the comments passed on firm 1. If you go to firm 3, they re going to expect a long project, commented an IT director in the energy and resources sector. Several clients commented that the quality of firm 4 s work had improved, suggesting there have been issues in the past. The best consulting firm I ve worked with was firm 4. I wouldn t have said that 12 months ago, said an IT director in the manufacturing sector. Then, they came and did a workshop with us on shared services it was nothing special. To be fair, they then offered some further advice, to which we said that doesn t offer us value for money. Their reaction was very professional: we sat down and had a discussion. The quality of their people is very good, they brought better people in to win us over. Very impressive as individuals and as a group: they really knew their stuff. The firm was singled out for praise in the data analytics and modelling domain which, as we mentioned earlier, is one key driver of consulting projects across many industry sectors. Analytics and big data is one of the most important things for us at the moment, and firm 4 have done a fantastic job, said the finance director of a services company. We presented them with a really difficult problem. They came up with a pragmatic way of working. Figure 11 Comparing presence and perceptions among the Big Four firms in the UK 92 % 90 % 89 % 92 % 71 % 68 % 62 % 60 % Firm 1 Firm 2 Firm 3 Firm 4 Total number of mentions (blue columns) Happy clients (90% confidence interval)* * As with all surveys, it may be that the people we surveyed were not totally representative of all clients of these consulting firms. To account for this, rather than simply show the answer we got from our sample (% of clients positive about the firm), we are instead showing a range that we can be 90% confident the true answer sits within. These ranges vary in size: the greater the number of comments we had, and the greater the consistency of those comments, the smaller the range. Source Information Services Ltd 2013 SAMPLE COPY 79
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