Australia’s management consulting market set to expand in 2018

13 November 2018 Authored by Consultancy.com.au

Looking at the combination of Australia’s management consulting market growth in 2017 and the exceptional growth posted by the Big Four firms earlier this year, forecasts for growth in 2018 project a bourgeoning professional services economy.

Australia’s management consulting market tipped US$5 billion in 2017, experiencing 7.1% growth. In the past year, a combination of several signs point toward continued significant market growth within the consulting industry. Consultancy.com.au has followed the sector closely over the past year and identifies multiple trends, backed up by figures from analyst firms such as ALM and Source Global Research.

Earlier this year, the Australian Bureau of Statistics released data showing that the professional services sector is set to become one of Australia’s largest industry groups. The growth identified that Australia was undergoing a transformation to a white-collar economy, and the professional services sector has since the beginning of the decade grown by 30% to become Australia’s fourth largest employment segment.

Secondly, increasingly powered by the expansion of Asian-based companies, Australia acts as a stepping stone and the consulting industry as a premium advisory. It was announced in September that Asia Pacific leads the globe’s growth in terms of management consulting, having managed continuous growth of between 6-7% since 2015. Led by Greater China, South-East Asia and Oceania, the total APAC management consulting market reached US$50 billion in 2018. 

A third reason behind the expected growth is increasing government interest in digital transformation. Although the country is coming into an election year – with a major election issue forming around the use of consultants for public sector work and a $5 billion consulting spend – the Australian Government’s ability to implement Industry 4.0 technology is exceedingly limited.

Size of the Australian management consulting industry ($ / billion)

As the high wages of local tech talent and the drawcard of tech hubs globally restrict the talent pool, the government continues to lock down contracts with tech advisory firms. For example, global technology-minded consulting firm Accenture was tapped to engage in multiple work for the Australian Government, for the merger of Border Protection and Australian Customs, and were the lead contender in a multi-million dollar bid to digitalise the country’s visa application system.

“Digitisation is the key driver in Australia’s consulting market, with clients turning to consultants for advice on customer service and experience, while demand for organisation-wide transformation is also spreading quickly,” said B.J. Richards, the Senior Editor at Source Global Research. “At the same time, data & analytics, moves to cloud-based systems, and RPA feature among the most in-demand solutions for clients.”

The market itself and its cycle of growth have both been increasing since 2013. In the past five years or so, the Australian management consulting industry has grown by over 20% from US$4.2 billion. According to Source’s data, the results are far from a surprise.

The firm – which focuses specifically on the movements of the global management consulting industry – conducted a survey with their Australian clients last year. The results came in showing that an overwhelming majority (62%) indicated that they expected to increase their consulting spend over the next year and a half. 

The Australian management consulting market – by industry

Broken down into sectors, technology consulting has been the greatest driver of growth over the past year. Performing at an above average growth rate of 8.6%, Australian companies are engaging consulting firms to increase their digital competency and systems. From cloud-based services to ERP and agile, consultants across the country are turning to digital to propel their profits upwards.

Edward Haigh, Director at Source Global Research, said that whilst Australia’s digital journey may be further progressed than the global average, there is still much which can be done. “The broad consensus among consultants is that Australian companies are ahead of the global average in terms of their adoption of digital; behind the US, some parts of Northern Europe, and the mature Asian markets, but ahead of everywhere else. The impact of digital has also extended into consulting firms.”

Overall, the local management consulting industry is dominated by four main categories including financial services, energy & resources, the public sector and other (which includes technology based businesses). ‘Other’ is the largest segment for consulting earnings, followed by financial services – where traditional institutions are battling with fintech newcomers – at 23% of the market. Energy & resources is an industry which is also heavily pursuing digitalisation in order to reduce overheads, personal costs and increase sustainable practices – at 21%. Australia’s public sector makes up 18% of the total consulting industry earnings or the equivalent of roughly $1 billion annually. 

Size of the global management consulting industry ($ / billion)

Consulting industry outlook

The experts at Source believe that 2018-19 will be another excellent year for the consultants of Australia. However there are some challenges that the industry must overcome to sustain its currently level of growth.  

The battle for talent, particularly within the tech space, is increasing in this highly competitive industry. Firms are constantly improving their workplace etiquette, promoting from within and training their staff to keep retention numbers high whilst creatively appealing to new employees from a broad range of industries. 

Whilst a number of campaigns focused on drawing in recent graduates seem to be working – with five consulting firms making the top 10 employers for graduates last year – firms are facing a shortage of experienced professionals who will meet clients’ demands. Source reports that the shortage isn’t necessarily translating into opportunities for the newly trained as the most-needed skills tend to come from years of professional experience.

Also, as digitisation is driving the consulting spend globally, the business model is also shifting the way that consultants deliver services to clients. As client demands expand in all directions, firms are in turn expanding their ecosystems to encompass a greater pool of capabilities and solutions. These include developing assets so they might provide proven, lower-cost solutions to common business problems. For firms to continue on their path to growth it is imperative that they partner with, merge or acquire information and tech firms to boost digital skills.

This also poses problems for newcomers to the Australian consulting scene – e.g., Entura, Inventium and Trimantium GrowthOps – which are trying to navigate market growth whilst remaining independent. Smaller firms and boutiques must fend off the buy-and-build strategies of the Big Four, which are aggressively buying companies from a range of industries including human resources, digital, creative communications, design and legal.

Finally, the authors highlight that global trade tensions (Australia's economy is relatively export-oriented) and the forthcoming general election in 2019 could have an impact on growth rates next year.

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