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Global consulting spending to increase, says positive Source survey

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London: Global consulting spending is set to increase but consultants are trapped in the back office, according to research published this week by Source Information Services, the specialist consulting research group.

In fact, says Source, half of consulting clients will increase spend on consultants in 2013, but many front office consulting opportunities may go begging.

One of the most comprehensive reports ever conducted into clients' use of management consultants finds that almost half (49 per cent) of consulting clients (1) expect their spend on consultants to increase in 2013, with a quarter expecting double digit percentage increases. In particular, companies operating in the energy and natural resources sector are expecting to call on the services of consultants, with a tenth expecting their spend to rise sharply.

The Source report was based on surveys and interviews with around 800 senior users and buyers of consulting services (2) from Europe, the Middle East and the US.

Source says that its new findings provide one of the most positive readings of the market it has taken since 2007, suggesting that there's genuine cause for optimism, with only 16 per cent of those surveyed expecting a fall in spend.

Cost-reduction remains a very significant focus for many clients — 87 per cent of clients said they expect to engage in cost-related initiatives over the course of 2013 and many expect to turn to consultants as they do.

Very close behind is a focus on growth — 86 per cent said they had growth initiatives planned for 2013 — but many expect consultants to support growth initiatives from the back office rather than lead them from the front office.

Fiona Czerniawska, Co-Founder of Source explains, "Our research suggests that the growth agenda continues to gather momentum amongst clients. Keen though they may still be to keep a firm lid on costs, for most growth is now an imperative. This represents one of the biggest opportunities for consulting firms at the moment, but for many it will manifest itself as demand for more traditional back office consulting around technology, for instance, or operations.

"Far fewer consulting firms will find themselves well-positioned to work alongside clients in the front office, on more traditional growth-related activities like marketing and sales. To some extent this is about consultants being victims of their own success in the back office, but the reality is that many have shot themselves in the foot here: failing to spot the need to update their thinking about the ways in which organisations can grow. Whichever way, we suspect there's a much bigger opportunity which may go begging as a result."

Technology consulting demand

In overall terms technology consulting looks set to enjoy the strongest growth. Organisations surveyed stated they are four times as likely to expect their use of consultants on technology projects to increase, as decrease. Only 14 per cent of the organisations surveyed said their expenditure in this area will fall — compared to 56 per cent who thought it would grow.

Opportunities still exist in the buoyant energy and natural resources sector for conventional, large-scale IT projects driven by the need to replace increasingly obsolescent systems. Elsewhere, more specialist advice is being sought in areas such as cloud computing where the IT and telecoms service providers lack the consulting skills to articulate and adapt their proposition, and the ability to discuss technology issues with functional heads outside the IT department.

The report also says that the use of technology consultants is increasingly not confined to the CIO. It says that as bring-your-own-device initiatives and data analytics begin to play an increasing role, other functional heads may be planning to increase the amount they spend on technology consulting, albeit from a lower starting point. For instance, CHROs and COOs foresee a rapid rise in their expenditure in this area; by contrast, CIOs expect small increases topping up the status quo. One CIO in the services sector commented: "Big data and analytics are important subjects for us and we will need consultants in this field in the future."

Operational improvement and strategy consulting

Demand for operational improvement consulting also looks set to grow faster than average in 2013, with 54 per cent of end-users expecting expenditure in this area to increase. Strategy consulting will also grow in 2013 but at a slightly lower rate than the market average. Source says that the immediate focus here will be efficiency, but growth is never far from thought. However, in stark contrast there is less growth in demand for advice on financial management and control.

Fiona Czerniawska added,"The need to improve technology, increase sales and reduce expenditure continues to drive a lot of organisational activity and expenditure on consultants, but there's lower than average willingness to use consultants to respond to risk, change culture and particularly implement existing plans."

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