When polled at the beginning of the year, consultants reported great confidence in top- and bottom-line growth for 2011. However, a more thorough analysis of the marketplace suggests cautious optimism may be warranted. That's the sobering and insightful perspective of Kelly Matthews, Senior Director of Research for Kennedy Consulting Research & Advisory. Her conversation with Consulting's One-on-One is a sneak peak into her upcoming presentation at Consulting magazine's Consulting Summit in Chicago on May 5.
Consulting: How would you describe the current state of the consulting marketplace?
Matthews: As of Q1 2011, we're in a growth mode. Client companies are facing strong pressure from competitors as they pursue a growth agenda, so clients are looking for consulting help to enable global, cross-functional transformations within their business — from their business and operating models, to the infrastructure that supports their operations — in order to facilitate and accelerate growth. We anticipate much of the growth will need to come through capturing competitor market share and emerging market economic growth.
Consulting: How is this market recovery different from past economic cycles?
Matthews: First of all, the market declined by more in 2009 than it had in any of the prior 40 years that Kennedy has been covering the consulting industry. The recovery is also different. Unlike past cycles where a downturn was followed by a spike in demand, this rebound has been slower, building gradually in the second half of 2010 and into 2011. There isn't any one big tangible thing, such as SOX compliance 5 years ago, which is driving demand. Many companies are still cautious about spending. Clients need to step up their global competitiveness and are looking to consultants to work with them to bring about this cross-functional performance improvement. Also, fees are still not back to their 2008 levels, and many clients have matured in their approach to working with consultants, which are slowing the pace of the rebound.
Consulting: Where are the biggest opportunities for consultants in 2011?
Matthews: By industry, we're seeing the largest growth in financial services, especially banking and capital markets, parts of the healthcare industry, as well as oil and gas, and utilities. By geography, the emerging markets — China, Brazil and parts of Middle East/Africa — are expecting continued high growth. Western Europe still lags behind other developed regions, including North America. The current situation in Japan will have a significant impact on the country's economy and on the demand for consulting services. There will be a massive rebuilding required that will generate demand for consultants there, but not until 2012 at the earliest. Across industry and geographic markets, we expect strategy, operations and IT consulting to outperform the overall market. Financial consulting will be about average and HR will be a bit slower to rebound.
Consulting: What are the biggest obstacles to growth?
Matthews: Those consulting firms that learned their lessons from past downturns — investing and keeping staff, and redeploying to faster-growing geographies, industries or services — are much better positioned for growth. Those that cut back significantly in 2009 are facing the challenge of having to staff-up to meet demand. Additionally, with the maturation of clients, consultancies need to adapt their approach to working with client organizations. They must work more collaboratively and flexibly, bringing customized, albeit cost-effective, solutions to clients. This can be done, in part, by working in an iterative fashion with clients while leveraging consulting assets/technology, offshore resources, and a greater level of specialized expertise whenever possible.
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