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Struggling Italian economy leads to flat consulting market - Source

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London: As the Italian economy continued to struggle, the consulting market remained flat in 2013 — growing by just 0.6 per cent to just over €1bn, according to research released today.

However, growth of 2 per cent in 2014 is predicted with consultants more optimistic that better times are ahead as strong growth is anticipated in some of Italy's largest consulting sectors, and a more stable political situation is expected to emerge.

The report from leading global consulting market analysts, Source Information Services (Source) also revealed that as Italian companies are eager to expand internationally, there is a good demand for consulting firms with cross-cultural knowledge and global reach, which is good news not only for the large, global firms operating in the market but also smaller, local firms with a solid global strategy.

Danilo Zatta, Partner at Simon-Kucher & Partners, said, "Services in demand are those that support the common client focus of how to be successful outside of Italy and how to become an export-led business."

Financial services remains the largest and fastest growing sector by some distance — up 2.9 per cent to €296m due to demand from regulation, modernisation, and digitisation projects. Healthcare was the next fastest growing market (2 per cent to €29m), though it remains the smallest with price competition making it a difficult area in which to do business.

B.J. Richards, Senior Analyst at Source and author of the report commented, "The Italian market is also being helped by a transformation trend among clients who can no longer afford to delay many of the investments they put off at the height of the crisis and are having to adapt their business models to better fit the post-crisis realities. These projects provide strong opportunities for firms with the specialist knowledge and capacity necessary to take them on. Those with strong digitisation skills will do particularly well here."

Price Pressure

The market's low appetite for consulting is triggering intense price pressure, which is impacting how firms do business. Many are being forced to take on unprofitable projects; maintain revenue by taking on a larger number of lower-paying projects; make efficiency improvements; and/or attempt results-based pricing in their effort to keep the doors open until better days emerge.

Financial management & risk and technology are the largest and fastest growing services in the Italian consulting market — both growing by 2.2 per cent in 2013. Regulatory work, cybersecurity, and bankruptcy-related services are driving demand in financial management, while technology benefits from both traditional IT work and an interest in the cost-cutting potential of new digital tools.

Among consultancies, the Big Four and technology firms enjoyed the most success in 2013, but looking ahead to 2014, consolidation can be expected to remain a big factor.

B.J. Richards added, "With such a high degree of fragmentation, it's no surprise that consolidation is a major factor here, and there's potential for it to be an even greater force in Italy than elsewhere. While many small and mid-sized generalist firms have disappeared altogether in recent years, lots of smaller, niche firms continue to thrive and remain attractive candidates for their larger brethren looking to expand their offerings and supply the specialists this market's clients increasingly demand."

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