Market sceptics forcing global consulting rethink

By Stuart Finlayson

The global consulting markets are undergoing a phase of uncertainty and business model redefinition, as changes in buyer behaviour drive shifts in the competitive landscape and vendor positioning.

The squeeze on IT budgets is prompting the market to approach the evaluation of consultants' worth with increased vigour, according to the latest research report by analyst group IDC.

Despite the evolving market dynamics, worldwide consulting spending is expected to increase, but at a pretty modest rate, from nearly US$47.9 billion (AU$639 billion) in 2004 to US$57.5 billion (AU$76.7 billion) in 2009, at a five-year compound annual growth rate (CAGR) of 3.7 percent.

"In an environment of declining IT budgets, technology simplification and standardisation, scepticism around consultants' value proposition, increased interest in business process outsourcing, and advancement of the global labour sourcing model, IT and business consulting services vendors are reinventing the way they market, sell, deliver, and make profits on consulting services business," said Anna Danilenko, program manager for Consulting Services research at IDC.

While this study finds that overall consulting spending in 2004 fluctuated between a flat trend and a slight increase, the market has several pockets of growth including emerging technologies, regulatory compliance, infrastructure and dynamic IT. In addition, although consulting spending is stagnant, the number of consulting projects signed and delivered is increasing, which is indicative of the trend towards smaller projects and more aggressively priced services.

There is also a marked trend amongst vendors towards selling consulting services as part of outsourcing engagements. This is particularly evident in the BPO (Business Process Outsourcing) space, with many outsourcing engagements now including high-value consulting services

Consulting vendors have increasingly begun to focus on building and enhancing their healthcare and government practices.

One area that needs to be addressed by vendors is the general lack of clear understanding on the part of the buyer of the short-term tangible value of transformational consulting services.

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