London: The Eastern European consulting market grew 5.3 per cent to over €1bn in 2014, while the beleaguered Russian market plunged 12.4 per cent to €513m.
These findings are published in a new report today (13th July 2015) from global consulting market analysts, Source information Services (Source). The report reveals that those markets in Eastern Europe with closer ties to Western Europe performed better than those reliant on trade with Russia.
Consultants in Eastern Europe still faced the challenges of stiff competition and low fees, but most found there were plenty of opportunities to be had — particularly in Poland and Slovakia, where the consulting markets respectively grew by 8 per cent to €392m and 8.6 per cent to €71m.
Technology firms suffered the least in Russia, shrinking by only 4.4 per cent, while the rest fared much worse. Eastern Europe was a different story with all firm types growing, but it was a particularly good year for Type A (accounting) firms, which grew 7.9 per cent.
Dr Fiona Czerniawska from Source said: "The year didn't start off too badly for Russian consultants, but the combination of sanctions, falling oil prices, and a tumbling rouble meant that work either began to dry up or that consultants found their contracts were suddenly worth a lot less once they'd converted revenues into dollars or euros for their global firms. Many firms experienced both pressures at once."
Libor Witassek, CEO and Managing Partner from DC Vision, added: "Everyone was talking about the situation in Russia having a big impact in Eastern Europe, and while things are difficult in certain industries, like agriculture in Poland, the worries have so far turned out to be worse than the reality."
Eastern Europe saw respectable levels of growth across all consulting services, particularly in technology, financial management and risk, and operational improvement. All service lines shrank in Russia: operational improvement suffered the least, while strategy (-20.1 per cent to €152m), and HR and change management (21 per cent to €52m) shrank by over 20 per cent.
While interest in digital is driving demand for consultants in many Western consulting markets, this market is still nascent in Eastern Europe and Russia. This is because many clients are focused simply on survival and don't have the headspace (or budget) to think about it. The Source report says that there are some industries dipping toes in the digital pool, but it's still in a fairly piecemeal rather than transformational manner. However, Source says that there is a huge opportunity on the horizon that may materialise when client confidence improves.
Poland remains a strong market
Aside from the Russian market, Poland is the largest economy in Eastern Europe, and it has the largest consulting market. There are conflicting opinions amongst consultants on the general state of affairs: some felt things were going well while others were jarred by the comedown from 2013's exceptional growth. But overall, this was a strong market in 2014 and one of the fastest-moving in the region.
Zbigniew Szczerbetka, Managing Partner, Consulting from Deloitte added: "Poland was a 'green island' during the recession, so the consulting market fared comparatively well during the financial crisis — and now it's had an additional boost as the rest of the market has picked up."
Should consultants persevere in Russia?
The report says that it expects consultants in Russia to have another challenging year in 2015, with the market expected to shrink again by roughly the same amount. With times so tough, it's not surprising that a lot of consultants are asking whether Russia is still worth the trouble. This is especially true for big, global firms, for which Russia is a very small part of their global strategy, and the temptation to cut and run must be strong.
Gabor Kornai, President, AAM Management Information Consulting Ltd, added: "We had plans to expand to Russia and Ukraine, but obviously that's not happening now. Hopefully, it's something that we can reconsider in a few years. For now, our interests have switched to Bulgarian expansion, with an initial focus on banks."