Businesses in Australia and Britain are the most likely to call in consultants and external advisers in the world, according to a study of the global advisory market.
The study, by Britain-based research firm Source Global Research, has also estimated that Australia continues to have the largest consulting market relative to national income in the world.
Source ranked Australia as having the third most attractive market in the world due to the high relative level of client demand and the premium local firms are able to charge.
The research firm added that digital transformation was again driving demand for consultants in Australia and around the world.
“The region’s enormous consulting market, relative to GDP, just keeps giving, providing average returns that will only be bettered in DACH – Germany, Austria, and Switzerland – and the Gulf Cooperation Council – which includes Saudi Arabia, Kuwait and the United Arab Emirates.”
“The region’s enormous consulting market, relative to GDP, just keeps giving, providing average returns that will only be bettered in DACH – Germany, Austria, and Switzerland – and the Gulf Cooperation Council – which includes Saudi Arabia, Kuwait and the United Arab Emirates.”
High demand, premium
Australia and Britain were both ranked top in the world for clients’ “propensity to buy” consulting services, a measure of demand based on Source’s interviews with firms and their clients.
“This is the third straight year that these two regions have vied for the top spot, but it will be interesting to see whether Brexit has an impact on British consulting market in next year’s data,” Mr Haigh said.
Source also found that Australian firms were able to charge a healthy premium with the local market ranking third for “average revenue per consultant”.
The research firm’s findings about the local consulting market are illustrated by the revenue growth and shift in priorities towards consulting of the big four consulting firms Deloitte, EY, KPMG and PwC.
These four firms grew thanks to their surging consulting divisions, while statutory audit has become just one part, and a small part at that, of these giants.
The ability of firms to charge a premium is also demonstrated by The Australian Financial Review’s recent revelations about EY’s financial services practice.
EY earns a margin ranging from about 35 per cent for assurance work through to almost 50 per cent for consulting and cyber-security work at ANZ bank, and the firm wants to boost its billings at the bank.
Consulting firms will need to focus on areas that include building up their brand and investing in technology, said Anthony Mitchell, co-founder of boutique strategy consulting firm Bendelta.
“While some consultancies have strong brands that make them top choices for ‘nuclear event’ work, very few of these come anywhere near the strength of the most powerful consumer brands,” he said.
“In terms of technology, while plenty of firms have their own methodologies, frameworks and even trademarks, it’s very hard to think of many large players in this industry which have a proprietary technology which clients would be reluctant to move away from.”
Potential dark clouds
Source’s Mr Haigh warned that despite the sunny outlook for the local consultant market, there are potential clouds on the horizon including “next year’s general election, current political instability, and Australia’s vulnerability to global trade tensions”.
“Australia’s growth forecast has taken a dip to reflect this export-oriented economy’s vulnerability to global trade tensions, current political instability and forthcoming general election” he said.
“In fact it’s a region that has relatively little sway over its own fate, and could suffer badly from outside contagion causing its notorious property bubble to burst or the exchange rate to fall.”
Other factors that could reduce business, especially for the big four, include federal Parliament’s ongoing consulting inquiry, the natural pause in agency spending that occurs in the lead-up to an election and the questions being raised by the prudential regulator and the Hayne commission over the ability of the big four to carry out multiple “independent” roles at companies and on behalf of regulators.