Strong growth for management consulting markets of GCC and India

12 December 2016 6 min. read
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The management consulting markets of the GCC and India have seen strong expansion last year, growing by 9% and 11% respectively.

Despite slumping oil prices, the consulting market of the Gulf Cooperation Council (GCC) – consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates – performed well last year, growing 9.4% to $2.7 billion. The Big Four firms hold a strong stake in the region: 34% of the region’s consulting income in the top tier space* ($913 million) flowed into the pockets of DeloitteEYKPMG and PwC.

Although the growth rate of the region is impressive in comparison to other global consulting industries, it is markedly lower than the region has been used to (25% in 2013 and 15% in 2014) according to data from analyst firm Source Global Research. This fall can be attributed to the structurally low oil prices impacting the spending power of governments and large corporations.

Saudi Arabian consulting market

Saudi Arabia accounts for almost half of the GCC consulting market ($1.25 billion); the country was therefore instrumental in driving much of the region’s growth last year. Spending on consultants in the Kingdom is largely carried out by the public sector as many of the country’s economic reform and diversification programmes – including a shift away from oil reliance and a massive investment agenda – are supported by (international) consultancies. Among the firms delivering high profile work are McKinsey & Company (the consultancy was, for example, hired by Deputy Crown Prince Mohammed bin Salman to support ‘Vision 2030’), The Boston Consulting Group (BCG), A.T. KearneyOliver Wyman and Strategy&, all of which have (rapidly expanding) offices in Saudi Arabia.

Size of the GCC Consulting Industry

The lucrative battleground for consultants in Saudi Arabia has, however, caught the eye of competition causing it to heat up, thereby putting pressure on the supply versus demand equation and on prices / margins. In addition, the market is facing some anxiety, as the question is of how long the Saudi government will maintain its big spending pattern against a backdrop of reduced oil revenues.

Saudi Arabia’s government isn’t alone in turning to consultants, as public sector institutions are embracing external support to advise on their respective issues across the GCC. The total public sector advisory expenditure grew by nearly 12% to $856 million last year. In comparison, the revenue of the healthcare, pharma and biotech industries– the region’s fastest-growing sectors – is just $174 million combined.

Other GCC advisory markets

GCC’s second largest GCC consulting market, the UAE, grew by 4.3% to $788 million. Qatar saw its consulting fee income rise by 6.6% to $329 million, Kuwait grew its advisory space by 3.7% to $183 million and Oman booked a solid 6.9% increase in market value to $100 million.

When it comes to service lines, technology was the fastest grower in the GCC, expanding by 12.2% to $895 million. Operational improvement enjoyed a 12% increase to $534 million.

Indian consulting market

The consulting industry of India managed to outperform the GCC last year, increasing 11% to $1.87 billion, primarily on the back of strong growth in spending related to digitisation and government reforms, which have contributed to the accelerated globalisation of the Indian market. In the face of increased competition from abroad, domestic companies are under pressure to elevate their managerial and operational maturity, resulting in greater consulting demand that is often aimed at improving competitiveness and professionalisation.

India also enjoyed a considerable increase in foreign direct investment (FDI) into the country last year, giving strategic and financial advisory consultancies more opportunities to help multinational corporations (MNCs) navigate the market. The large, multinational consulting firms are increasingly helping Indian firms expand abroad, while foreign-based MNCs are eager to work with local firms to develop their India market-entry strategies.

Size of the Indian Consulting Industry

The financial services industry remains India’s biggest buyer of consulting services by a substantial margin, growing 12.3% to $586 million in 2015, with digitisation and a flurry of new bank permits driving the demand (new license presents an opportunity for lucrative consultancy work helping the new bank get on its feet).

In terms of functional work, technology is the biggest consulting service line in India as well valued at $852 million, followed by strategy at $688 million.

Despite the rapid growth, consulting fees in India remain stalled at very low levels, making profitability tough in India. Firms are, according to the analysts, trying a number of approaches to ease the pressure, including focusing their efforts on winning the market’s most sophisticated projects, building stronger relationships with clients, and adjusting their models to allow them to deliver quality work at prices that clients will find more palatable while protecting their own margins. The Indian consulting market further faces a relatively large polarisation between segments, with high-value strategic work on one end and low-cost technology work on the other, while the middle ground is characterised by a large variance in project types and fees.

Looking ahead, the Indian consulting market is set to continue to see above average growth, with fortunes likely to go from (very) good to great if government reforms move at the pace envisaged by Prime Minister Modi and his policy makers.

With a total market size of $55 billion, the US is the globe’s largest consulting industry, followed by the DACH region and the United Kingdom.

* The estimates by Source look at the revenue of mid- and large-sized consulting firms (those with more than 50 consultants) and typically includes work they have carried out for mid- and large-sized clients. Taking into account the consulting activities of small consultancies and boutique, as well as freelancers, would lead to a much larger sizing.