The Big Four share of the European consulting market

Everyone in consulting knows that the Big Four accounting firms (Deloitte, Ernst and Young, KPMG and PwC) have all grown significantly in the last few years. Indeed, many of us have suspected that they may have out-performed the market, sometimes by a factor of two or three. But none of us could put a figure on what that means for market share.

Our recent report on “big consulting” (consulting done by consulting firms with more than 50 consultants for clients with a turnover in excess of €500 million) in European, the Middle East, India and Africa estimates that the size of the market in 2010 was just under €25 billion. And the Big Four firms account for just over a quarter of this. Their share is slightly larger, not only than the combined revenue of several hundred traditional management consultancies, but also than that of the big systems integration firms. It’s also quite a lot larger than the share enjoyed by strategy firms.

Of course, there’s a fair degree of variance under these headline figures. When you break this down into services, the Big Four share ranges from around 90% of the financial management market to about 20% of operational improvement work (the lion’s share of which continues to go to mid-sized specialists). Moreover, despite the rapid expansion of these firms, two areas stand out where there level of penetration is even lower: Big Four firms have only around a sixth of the market for high-level IT consulting (our figures don’t include systems integration) and a similar share of the strategy consulting market.

What should we take away from this? First, that most types of consulting firms should be rightly worried that the Big Four will further encroach on their territory; indeed, PwC’s recently announced acquisition of PRTM shows that there’s plenty to go for in the highly-fragmented traditional management consulting / operational improvement area. But the second lesson is that taking a bigger share of the IT and strategy consulting markets may be proving to be a more difficult proposition. In both cases, the supply side is more consolidated so there are fewer acquisitions within easy reach.

But the other complicating factor is the attitudes of clients. Operational improvement consulting never stretched the Big Four’s brands: when you ask clients to name the firms they most associate with this type of work, Big Four firms have a strong presence. But ask them which firms they think for IT consulting and only one Big Four firm, Deloitte, is mentioned by more than 5% of clients, compared with IBM, which is mentioned by almost half. Deloitte is also the only Big Four firm to scrape a place in the top five firms associated with strategy. Such perceptions are always slow to change: big acquisitions often help, but not always, because they’re so difficult to do in consulting without one party effectively absorbing the other.

Et in Arcadia ego: even while they outperform the market on so many fronts, the Big Four firms have yet to solve this problem