Growth in the German, Swiss and Austrian (GSA) consulting market, now worth almost €7bn, slowed sharply to just 4 per cent in 2012, according to new data from specialist consulting market research company Source Information Services.
Source's report on the Germanic market, released today, shows that its two biggest sectors — financial services and manufacturing — grew more strongly than the region overall, at 6.3 per cent and 5.4 per cent respectively.
Source also found that the German market has grown more quickly (4.8 per cent) to €5.93bn than Switzerland (2 per cent), and Austria (3 per cent).
As strong market growth stalls across the region, prices, which tend to be amongst the highest in the world, are also coming under intense pressure from clients keen to reduce expenditure. The Source report says these factors are forcing consulting firms to turn their attentions back on themselves: to look for efficiencies within their own businesses to help offer lower-priced solutions to clients.
Client sentiment stronger than European counterparts
Despite these pressures, GSA client organisations are more likely to use consultants than their European counterparts. A third of clients said their organisation had an official edict that the increased spend on consulting was acceptable. Elsewhere this figure was just over a fifth (21 per cent). Over half of clients (55 per cent) in the GSA also expect spend to increase in the next 12 months and more than half of those expect a double-digit increase.
Technology and operational improvements, which are two of the biggest consulting services in the GSA market both grew strongly — up by 8 per cent and 7 per cent respectively. However, strategy consulting, which is the biggest part of the market, only grew by 3 per cent in 2012.
Edward Haigh, a director of Source and an author of the report commented, "Whilst 4 per cent growth makes the GSA market the envy of consultants in the UK and France, it will feel difficult to firms which have become accustomed to much higher levels of growth. Indeed the disorientating effects of deceleration may actually make it feel as though the market is contracting."
Public Sector market only grows at 0.9 per cent
The public sector market for consultants across the GSA only grew by 0.9 per cent. The report says that compared to most other western economies the public sector in Germany is not a substantial buyer of consulting services, and the need for greater efficiency has only served to reinforce this position. Whilst in Switzerland, the public sector market has declined with central and regional administrations actively seeking to reduce expenditure.
The three issues dominating client agendas
The three issues dominating initiatives planned by clients in the next 12 months are cost-cutting (92 per cent), growth (89 per cent) and the need to improve technology (81 per cent). But the report says that not all of these are expected to lead equally to consulting work. Cost-cutting may still be the most dominant issue in clients' minds but fewer people expect to call on the services of consultants to help them with this than expect to do so for growth and technology projects.
Future opportunities for growth
The greatest opportunities for growth in the GSA consulting market today lie in an appreciation of the importance, to clients, of both specialism — a trend that's in evidence globally but has always been particularly marked in the GSA — and implementation.
Haigh added, "GSA clients may not be as keen as their counterparts elsewhere to involve consultants in implementation but they're placing a growing amount of importance on consultants understanding (and having experience in) implementation and creating practical recommendations that take into account the challenges that lie ahead. But perhaps the greatest opportunity today lies in winning transformation projects: cross-functional, often multi-geographical projects that are fast becoming the key determinant of success in the market."
For more information on this Source report go here.