London: The Spanish consulting market returned to growth in 2013 — growing by 0.8 per cent to just over €1.1bn, according to a new report released today. This follows a 3 per cent slump in revenues the previous year.
The report from leading global consulting market analysts, Source Information Services (Source) shows that the financial services sector continues to dominate the Spanish consulting market: consulting revenues in the sector grew by 3.9 per cent in 2013 to €286m, largely off the back of a tough regulatory environment.
Revenues also increased in the energy and resources sector, growing by 2.3 per cent to €136m again due to regulatory work.
After a dramatic 14 per cent fall in public sector work in 2012, there were no further falls as the market for consultants remained flat.
Source says that most indicators, including notably positive sentiment amongst clients about their plans, point to an uptick in 2014 — its forecast is for growth of 6 per cent on 2013.
But with most major firms still present in Spain — alongside many smaller specialists — this remains a hugely competitive market, and the fight for what consulting spend exists is fierce, leading to falling prices and consolidation.
Edward Haigh, Director of Source said:, "Although growth has returned to the market, this comes from a dramatically reduced base, and does little to answer the longer term questions about the prospect for growth in consulting against a backdrop of a weak Spanish economy. What's more, we believe that a big part of it will be driven by an absence of resources within client organisations. Therefore, consultants will be filling gaps."
More international work could be the solution for consulting firms
The report says that for many consulting firms the answer to growth lies overseas, in markets like Central and South America, with which Spanish consulting firms, and their clients, have cultural ties.
On the other hand, with prices in the domestic Spanish consulting market having fallen so precipitously in recent years, there is a real opportunity emerging for consultants in the country to position themselves as a new alternative to India — offering low priced (but arguably higher-quality) services closer to home for most European and American clients.
Fernando Rodriguez Peralta, CEO Capgemini Consulting Spain, said, "Exports in Spain are improving very much and as a big part of the economy are doing better. The evolution of the Spanish economy is going well. The macroeconomics are fine, but normal people and consumers still don't have money in their pockets. But from the B2B view, we are getting positive responses in meetings and proposals. So, the objective perception is that we're facing a good period."
Spanish clients seem to be focusing on productivity, which is keeping expenditure in operational improvement relatively buoyant, but financial management and risk (again, largely driven by regulation) was the service line that performed best in 2013, growing by 2.1 per cent to €149m. Technology, the largest service line in Spain, recorded growth of 1.6 per cent to €521m.
Haigh added, "From a service line perspective, we expect technology to perform as well as any other service in 2014, given its role as the enabler of productivity. And, new technology (cloud, social media, mobility etc) is now being prioritised over upgrades to existing technology by Spanish clients. Our suspicion is that cash-strapped clients are trying to leapfrog one stage of investment. If that's the case, clients elsewhere — who tend to be prioritising improvements to their existing systems — may well be watching very closely to see if it's a trick Spanish clients manage to pull off."