Thursday, July 4, 2013
Consolidation looks likely as a result but will benefit some consulting firms more than others…
Source Information Services has today (4th July 2013) published the third part of its Strategic Planning Programme - which has found that between one third and two thirds of organic growth amongst big consulting firms in 2012 came from large-scale transformation projects.
The report, ‘Transformation and consolidation: The two defining trends in the 2013 consulting market’, says thattransformation projects, which differ from conventional consulting work in their breadth, scale and ambition, are having a substantial impact on the shape of the consulting industry. But, it also says that they are as much a threat as an opportunity, creating a more volatile market in which the winners take all.
The report also identified the two different types of transformation project, 40 per cent of which start out life as large-scale IT projects but morph into broader change initiatives, and 60 per cent, which start small as a result of specific change, but have wider implications and opportunities. The trend towards these transformation projects is also likely to increase the pressure for consolidation across the consulting industry.
The growing number of transformation projects may be creating a degree of homogeneity, but not every firm is benefiting equally from the opportunities. To assist firms to capitalise on these projects, Source has identified seven critical success factors where transformation work is concerned:
- Uniqueness – The starting point of a transformation project from a consulting firm’s point of view.
- Multi-geography – Clients expect the consulting firms they work with to have a globally integrated structure.
- Multi-function – As a transformation project expands different skills are needed from the consulting firm – so multi-disciplinary or multi-specialist models are critical here.
- Size – The only firms capable of winning transformational projects are big ones, because of the level of implementation likely to be involved.
- Technology – Transformation projects that emerge outside the IT function should be business not technology led.
- Expense – The high cost of transformation projects won’t stop clients wanting to mitigate the risks they are familiar with.
- Ambition – Ambition still plays a role in choice of consulting firm, and consultants should be able to match clients’ scale and scope of thinking.
Inorganic growth: the reshaping of the consulting industry
The report says that strategy firms have the most to gain from inorganic growth, at least where transformation work is concerned – and this is where Source expects most growth to be over the next 2-3 years. In short, if strategy firms want to overtake the Big Four firms in terms of being best positioned to do transformation work, they need to find a partner – and find one fast.
The Big Four have a lot to gain as well, and their ability to realise this also lags behind the potential value. These firms share with strategy firms a situation in which the greatest gains will come from the factors hardest to realise in practice: firms in both these segments would not benefit significantly from mergers/acquisitions which would increase their industry expertise, their geographic coverage, their range of functional experience, or even their size, even though most of these things would be comparatively easy to achieve.
Commenting on this, Fiona Czerniawska, co-Founder at Source said:
“The greatest benefits would be achieved by these firms by combining their forces with those of a technology company, or with an organisation such as a private equity firm, which might increase their ability to offer more risk/reward payment deals, or from demonstrating that the scale of their ambitions can match that of their clients – none of which will be remotely easy to carry out.”
For more information on Source reports contact alice.noyelle@sourceforconsulting.com or telephone +44 (0)200 700 5462/visit www.sourceforconsulting.com.