London, Dubai: Although the Saudi Arabian economy slowed to 3.6 percent growth in 2013, its consulting market grew by a staggering 25 percent to just short of $1bn. As the fastest growing consulting market in the GCC, Saudi Arabia has outpaced growth across the GCC region (up 18.6 percent to $2.2bn in 2013).
A new Source Information Services (Source) report, published yesterday, The GCC consulting market in 2014, reveals that with an economy more than three times the size of the UAE's and a consulting market not nearly as developed, the opportunity for consultants in Saudi Arabia is enormous.
The report also found that the next three strong performing countries in the GCC were the UAE — up 16.3 percent to $644m, Oman — up 12.1 percent to $87m, and Qatar — up 11.3 percent to $258m. The prospects for future growth in the GCC are also very strong with almost all (92 percent) of GCC clients expecting their expenditure on consulting services to either stay the same or increase in the next 12 months.
B.J. Richards, Senior Analyst at Source and author of the report commented, "Saudi Arabia, the UAE, and Qatar are far from the only games in town, however, with even smaller markets accelerating at rates that blow the doors off most of the West — Oman, Kuwait, and Bahrain could, in fact, be excellent investment opportunities, especially for small consulting firms looking for a foothold in the region. Lower fees and higher agility could allow such firms to build a solid business picking up work that better established firms aren't chasing anymore."
The Source report also reveals that the public sector remains the top buyer of consulting services in the GCC — up 27.6 percent in 2013 to $543m. With the Arab Spring tensions having largely abated, the focus has shifted to long-term, forward-looking economic development programmes — the most visible of all being the massive investments being made in transportation infrastructure such as international ports, regional rail networks, urban trams, and everything in between. Source predicts continued high levels of growth in the public sector, though growth could start to flatten out.
Commenting on the public sector's growth, Hani Ashkar, ME Senior Partner, PwC, who was interviewed for the report, said:, "Consulting in this sector is being driven by a continuation of demand from last year and the need for governments to respond to socio-economic challenges that are driving investment in labour infrastructure, housing security, education and healthcare."
Away from the public sector, the other hot sectors for growth were Healthcare — up 29.1 percent to $146m, and Financial Services growing by 19.5 percent to $393m. The report says that one of the major drivers of growth in Financial Services has been regulatory compliance and capital management, though banks are also now looking for growth. It also says that Islamic finance is a key theme which requires highly specialised support from consulting firms. Source forecasts further strong growth here of 10-15 percent in 2014.
Another major market trend has seen an evolution from strategy and toward large implementation projects. Pure strategy advice has fallen out of fashion with clients keen to take action and looking for firms ready to work with them from concept all the way through execution. As a result, the Big Four have now overtaken strategy firms as the biggest segment in the GCC, as strategy houses struggle with clients' shift toward implementation projects.
The report also says that consolidation has become a major factor shaping the GCC market as it becomes increasingly polarised between big firms and small specialists; the mid-market is rapidly disappearing. By far the biggest consolidation news of last year was PwC's acquisition of Booz. A relative small firm in most geographies, Booz was a market leader in the GCC, and everyone is eagerly waiting to see if PwC is able to hang onto their substantial market share.
Talent also continues to be the biggest challenge facing many GCC consulting firms. A solid education system makes junior hiring fairly easy, though the region is sorely lacking in experienced professionals. Matters are greatly complicated by government quotas requiring the hiring of nationals, who are simply not available in the required numbers.
A recent Source Study, Perceptions of Consulting in the GCC, which includes quality ratings of the top firms operating in the GCC region from client interviews, found that over half (54 percent) of executives in the region describe the quality of the consulting services they've received as 'high' or 'very high'.