Paris: The French consulting market contracted by 2.5% to just €3.7bn in 2012, according to new research by specialist consulting research group Source Information Services.
The new Source report, launched in Paris today as the French economy again slipped into recession, says that a number of factors explain this reduction — notably a poor macro-economic situation, the maturity and sophistication of clients, and a fierce focus on cost-cutting by French companies, making it difficult for them to justify using consultants.
Source's research also found that, of the nine major industries tracked, consulting revenues only grew in the Energy & Resources and Pharmaceutical sectors. Financial services and manufacturing, which remain two of the biggest consulting sectors, accounting for around half of all consulting spend in France, experienced a mediocre 2012 — leading to a substantial impact on the overall market. That led to a situation in which consulting firms were fighting to take share from each other through price cuts, a focus on differentiation and by leveraging their existing client relationships.
Will consulting spend in France increase?
A number of firms in France report a good start to 2013. However, uncertainty regarding the economic and fiscal health of the euro zone, re-ignited in early 2013 by the inconclusive Italian elections and manifested in the downgrade of the French GDP prediction for 2013, remains high.
The Source research also found that it's much harder to find organisations in France which have an official view that increasing consulting spend is acceptable than it is elsewhere in Europe. Just a tenth (9 per cent) of respondents in France fell into this camp, compared with around a quarter (24 per cent) elsewhere. A further problem is that although French clients are planning to undertake a wide portfolio of initiatives, they won't necessarily involve consultants.
Edward Haigh, a director of Source and an author of the report commented, "With both the supply and demand sides of the French consulting market waiting for something positive to happen, our forecast for the local consulting market this year is subdued. We expect, however, to see some growth in 2013, perhaps in the low single digits.
"Continuing expenditure on globalisation initiatives and the increasing number of large-scale, cross-functional transformation projects, look likely to be the main drivers of growth in 2013. This trend will favour larger firms, contributing to the polarisation of the French consulting market."
Globalisation is the brightest spot in a subdued market...
The Source report also found that one of the main drivers of the French consulting market is the continued globalisation of French companies. Matthieu Courtecuisse of SIA Partners, who was interviewed for the report, commented, "We grew by 15 per cent and we expect to deliver the same growth in 2013. We've been making some changes to our business with more international assignments taking place. This reflects the fact that French clients are investing more overseas."
Why French companies need consultants
Two things, more than any other, continue to drive the use of consultants in France. The first is access to specialist skills, a dimension highlighted regularly by clients. The second is about helping clients to cope with capacity and workload. The report says that despite more rigid labour market regulations in France than elsewhere, many companies are short staffed as a result of employees being laid off during the financial crisis.
Culturally, the report highlights that French clients seem to display a particular preference for traditional management consultancies, as well as French providers. Conversely, they admit to a certain irritation with the perceived arrogance of strategy firms.
Details of the report are here.