Demand for German consultants sees DACH consulting market grow €1bn in just two years
- Industry 4.0 drives strong demand for consultants in Germany’s manufacturing industry – up 8.9 per cent to €2.2bn
- DACH consulting market now worth €8.7bn
- Switzerland’s consulting market closes in on €1bn landmark.
With Industry 4.0 driving a strong demand for consultants in German’s manufacturing industry in 2015, Germany outperformed the wider DACH consulting market – growing by 6.5 per cent to €7.5bn. Strong demand for German consultants has led to the DACH consulting market growing by €1bn in just two years to €8.7bn.
Switzerland’s consulting market closed in on a €1bn industry landmark in 2015 – growing 5.7 per cent to €943m, but Austria recorded just 2.9 per cent growth to €265m.
These findings are published today (6th July 2016) in a new report from leading global consulting market analysts, Source Global Research (Source). The report states that while all industries across the DACH region grew in 2015, financial services (growing 7.1 per cent to €3bn) and manufacturing (growing 8.9 per cent to €2.2bn) clearly stood out from the rest. Strategy consulting continued to be the largest service in DACH, growing 6.1 per cent to €2.8bn, with risk & regulation the fastest growing service – up 8.9 per cent to €707m due to growing concerns around cybersecurity.
Edward Haigh, Director of Source Global Research said:“Manufacturing spend on consultants was mainly driven by the automotive industry, which makes up almost half of the total manufacturing market for consulting across the DACH region – together with a significant and growing interest in Industry 4.0. In 2015 companies wanted to get to grips with the practical aspects of Industry 4.0 – moving from theoretical, strategic discussions to turning these ideas into reality.”
The Source report also found that in the financial services industry there are no signs of the regulatory burden easing up. However, banks are becoming increasingly resentful about spending on compliance and are seeing consulting support very much as a commodity – pushing down consulting fee rates. As a result, although regulatory work continues to make up a substantial proportion of the financial services consulting portfolio, it is in many cases not particularly lucrative or attractive work and it is imperative for consulting firms to have in place the right model to address this part of the market if they are to make money out of it.
Holger Herbert, Consulting Leader, PwC, added:“In financial services we experienced huge price pressure, and this had an impact on rates, although it was a high volume and therefore high utilisation industry.”
Other key findings from the Source DACH Consulting Market Report included:
Pharma & biotech consulting hits double digit growthAlthough the Pharma & biotech consulting market represents a relatively small market in DACH, it was the fastest growing industry in 2015 from a consulting perspective – up 10.4 per cent to €275m. The Source report puts this down to a myriad of pressures on Pharma companies including regulation, which has been a strong driver of consulting work.
Industry 4.0 – just one part of the rising demand for digital consulting2015 was the year in which people started doing a lot more than just talking about digital in the DACH region. Companies finally moved from the discovery phase and towards implementation. While this didn’t apply to all industries, most organisations are eyeing up digital not just in the front office, as a means of improving customer interaction, but also an enabler of back-office efficiency and full business model revolution, notably in the form of Industry 4.0.
This drive towards digital saw technology consulting services grow by 8.2 per cent to €2.4bn in DACH. At the same time, there was a continued fall-off in “traditional” technology work, such as SAP and ERP initiatives – and the work that was available tended to be at the more commoditised end of the spectrum with high levels of competition continuing to push down prices.
Christine Ciriani, Partner – Head of Switzerland at Capco added:“A year ago, digital was a synonym for innovation, incubators, and start-up weeks. Now the discovery phase is completed, clients are more educated about what it means, and they want to leverage it into their world today.”
Nearshoring – an important mechanism for DACH consultingThe Source report also found that nearshoring (especially to Eastern Europe) is becoming an increasingly important mechanism for DACH consultants in their attempts to ward off the worst effects of commoditisation. It’s now often seen as a much more attractive proposition than offshoring to the likes of India – thanks to geographical proximity, linguistic capabilities, and the availability to relevant sector and functional experience.
Converging on TransformationConvergence was also a big factor in the DACH consulting market in 2015, with firms increasingly wanting to convince clients they can do everything in order to win large, much sought-after transformation projects. However, despite their desire for simplicity and accountability in working with consultants, clients remain sceptical about the idea of a one-stop shop. Consulting firms are responding to this by forming partnerships with other firms as a way of bringing together different capabilities to create the best of both worlds.
Edward Haigh from Source concluded:“Despite nervousness around global political volatility, DACH consultants are remarkably optimistic about the coming year. Consultants in Germany are buoyed by the strongest economic indicators in the region and are expecting another solid year, backed up by continued growth in financial services and further momentum behind Industry 4.0.
Although concerns remain around the stubbornly high franc in Switzerland, consultants are confident that they’ll be able to use innovative means to continue finding work until the storm passes. Austrian consultants, still expecting the lowest growth rate of the bunch, are sensing a slight upturn in their fortunes, with the hope that they’ll be able to convince consultants to contract them to help with cost-cutting in 2016 and will not be one of the costs cut.”
Original article can be viewed at www.sourceglobalresearch.com