Business transformation in the Gulf

By Fiona Czerniawska

The last time I was in Dubai it rained.  And I’m not talking about the desultory drizzle which you get sometimes.  It poured.  For an entire day.  Weather London would be proud of.  And it was clearly a shock to systems other than just mine.  Dubai roads, I discovered, don’t have drains (Why would they?  There’s usually nothing worth draining); they also don’t have a camber, so rain lay where it fell – which was all over the place.  Hazardous and unfamiliar driving conditions resulted in more than 600 accidents that day on the main road between Dubai and Abu Dhabi.

There’s a parallel here with the consulting market in the Gulf Co-Operation Council.  99% of the time it enjoys blazing sunshine (a report we produced at the end of last year concluded that it was the most attractive consulting market of the moment).  Our new report on the consulting market in the region, launched yesterday, pegged the consulting market in 2013 at $2.2bn, up 19% on the previous year.  There’s been some redistribution of growth, but Saudi Arabia remains by far the largest ($994m) and fastest growing (25%) market.  Client priorities have shifted a little: last year, the search for new sources of growth topped the management agenda; this year, it’s productivity.  Technology remains important (84% of the people we surveyed said this is an area of focus and investment for them).

From time to time everything gets just a bit too hot: clients who want to get on with the long list of things on their agenda are impatient, while consulting firms (like their clients) are engaged in a chronic struggle to recruit and retain high-quality people.  That means that, almost uniquely, a high proportion of clients in the GCC (more than a quarter) would be willing to pay more for the consulting services they buy.  At the same time, there’s dissatisfaction: while the overall level of specialist skills available is seen to be improving, it may not be keeping pace with clients’ increasing expectations.  We still hear plenty of complaints about the consistency and quality of consulting services and our survey of client perceptions (published in February) suggested that 38% think that quality is, at best, ‘average’ and only a third say that the value consulting firms add exceed the fees paid for them.

And that brings us to the storm clouds on the consulting horizon.  The GCC has been a booming market for the last three years, boosted by a host of local factors (investment in public sector projects being the major one) rather than the global economy, and priorities are changing.  Increasingly GCC governments want to encourage business to invest.  That should create a new raft of opportunities for consultants but it’s happening at a point when we see clients being more cautious about their future use of consulting services.  Don’t get us wrong: they still expect to spend more, but their enthusiasm for consulting appears to be changing shape.  When we asked them how their investment in areas such as technology is likely to influence their use of consultants 36% said it would increase it, but the equivalent figure in 2013 was 59%.  At the same time, 80% of organisations said they’re involved (or likely to be involved) in business transformation projects and here the proportion saying this will increase their use of consultants rises to 52%.  The same story is true of other consulting services – what we’re seeing, we suspect, is a shift towards a small number of large-scale projects (as business transformation ones inevitably are).

So why talk about the rain?  Because the new market conditions won’t suit every firm: we’re going to see some car crashes over the next couple of years.