London: Growth in the Australian consulting market slowed in 2013 — growing by just 2 per cent to just over US $4.2bn, according to a new report. Political uncertainty, allied to on-going concerns about the fragility of the economy (domestically and internationally) accounted for much of this slowdown. The rate of growth is expected to recover slightly in 2014, to about 3 per cent.
Consultants also benefit from consumers' interest in buying goods online
The report, from leading global consulting market analysts Source Information Services (Source), also revealed that the consulting market in Australia's large services sector led the way in 2013, growing by 3.9 per cent to $687m. Transport saw significant investment, while logistics and distribution companies benefitted from Australian consumers' interest in buying goods online from overseas vendors. Healthcare was also strong — up 3.1 per cent to $150m.
Gareth Davies, Associate Partner, Practicus, who was interviewed by Source for the report, said, "The high Australian dollar and the absence of GST on smaller purchases has led to a surge in online shopping, which has meant that Australia Post's parcel delivery has skyrocketed."
The Financial Services sector, the second largest market for Australian consultants, grew by 2.1 per cent to $790m. In this market, the Source report says that cost-cutting initiatives continued to drive demand as did a focus on consumer experience and using digital and mobile solutions to create new offerings. Regulatory work also stayed strong.
Edward Haigh, a director of Source and an author of the report, said, "Australia's consulting market may have been starved of decent growth in 2013 but it's something of a whopper already -if you look at the size of consulting markets relative to their host economies, Australia's is the second largest in the world. Consulting projects are focused on helping Australian clients be more productive, both in response to a relatively weak domestic economy and to the opportunities which exist for them internationally.
Henriette Rothschild, Managing Director, Hay Group, said, "The Australian workforce is higher cost than in many other markets. So organisations are looking for new ways to increase workforce productivity to get the best from local talent and be globally competitive."
Despite government austerity measures — consulting work continued to grow
Work for management consultants across the Australian public sector grew by 1.6 per cent to $663m — as consultants help government to modernise and streamline. The report says that there have been some very large government programmes recently, the most visible of which being the National Broadband Network project, which is thought to be the largest consulting project McKinsey has ever won in Australia — a feat accomplished in conjunction with KPMG.
Edward Haigh commented, "While there has been some slowing in the public sector's demand for consultants in 2013, there is a feeling that the government has no choice but to use consultants due to an exodus of talent at the mid-management level."
Peter Munro, Partner at A.T. Kearney added, "Large government programmes are going forward and these have been one of the drivers of growth. Development of a national broadband network is requiring consulting support. There are also plans to have a second airport in Sydney, and that will require support, as will the development of new payments platform. This type of work continues despite public sector cuts."
Technology dominates consulting service line growth
From a consulting service perspective technology dominated; growing by 3.2 per cent in 2013 to over $1bn. Productivity is once again the driver, but clients are embracing the potential held by new technology to enable much of what they want to do both in terms of productivity and the way they interface with customers. Consulting support around more traditional IT services like ERP also remained in relatively strong demand.
Ross Love, Senior Partner and Managing Director, The Boston Consulting Group, said, "Digital change is really starting to bite. Australia is three years behind the UK, which we see as being an advanced digital market. So, we are seeing a greater number of projects within the supply chain and in logistics."