The global consulting market is currently approaching an estimated worth of nearly $150 billion, up from $122 billion in 2012. According to Consultancy.uk analysis on data from a leading analyst firm, the 10 largest consulting firms retain a firm hold on the majority of market activity – which looks set to experience steady growth for the following two years. Judging from present rates of expansion, by the end of 2017, the global consulting industry is forecast to top a worth of $155 billion, with the industry having booked consistent 5% growth for the previous two years.
Disruptive technologies, as well as new market competitors leveraging them to challenge the long-term economic hegemony of major corporations, will likely continue to drive investment in consulting. In order to avoid becoming bystanders in the race for digitalisation, companies of all sizes are engaging consulting firms in order to assist them with technological and business transformations. Meanwhile, a sustained period of geo-political uncertainty arising from the unknown quantity of Brexit, and the decreasingly consistent Presidential stylings of the Donald Trump administration, mean businesses are keen to examine their international operations, in order to plan for worst case scenarios relating to new crises that may arise from such unpredictable variables.
Growth momentum is further lifted by the increasing complexity of the regulatory landscape across a number of sectors, including the implementation of the General Data Protection Regulation (GDPR) which will affect businesses across the world, despite being a European legislation. Earlier in the year it was estimated that non-compliance with the GDPR could see the FTSE100 companies stung to the tune of $5 billion in fines.
Risk management also remains a major source of growth in the industry. The segment, which includes cybersecurity, has been growing in significance in the wake of a number of high-profile cyberattacks, most famously the WannaCry ransomware incident, which hit companies across the globe. Businesses are subsequently keen to leverage external expertise in order to fight a war of cybersecurity, against fraud and breaches of data privacy.
In terms of the major beneficiaries of this sustained growth, the four largest accounting and advisory firms known as the Big Four – Deloitte, EY, KPMG and PwC – hold a substantial market share of 39%. Despite mounting regulatory pressure on the gang of four, they look set to maintain this dominance in the coming period. The Big Four have all seen impressive growth rates of their consulting arms in recent years, far outpacing the growth rates of accountancy, audit and tax wings.
However, the market share of the Big Four in the consulting market is nowhere near their market dominance in auditing, where in some countries they hold over 80% of the business in the top segment. Beyond the four leaders, the top 10 consulting leaders account for a majority of 56% of the market, an increase of 4% since 2014. Business skills, top talent, a wide geographic reach, coupled with technological capacities, are attractive qualities of the large consultancies, and the top names are known to be home to both – meaning businesses typically treat them as a usual first port of call for new projects.
The top 200, meanwhile, are estimated to have a 80% hold on the market, again up on previous years, which illustrates a trend for consolidation at the pinnacle of the industry. Despite an influx of rapidly growing start-ups into the consulting world, experts at leading analyst firms, including ALM, IDC and Gartner, predict that this consolidation is set to continue.
The 10 largest consulting firms in the world
The Big Four top the list of the world’s largest consultancies. PwC is the largest, having experienced a revenue growth of 5% to hit a total consulting revenue $15.9 billion in 2016. The firm has jumped above Deloitte, which headed the ranking for several years, largely on the back of an agressive inorganic growth strategy, and of course the landmark acquisition of Booz & Company which it closed in 2014.
PwC, which has also notably expanded its practices across Ireland lately, is followed by Deloitte, who saw 8% revenue growth, bringing in a total of $15.3 billion last year. With revenues of $14.5 billion, EY booked the highest growth of the Big Four. As the firm continues to invest heavily in its strategy outfit Parthenon-EY, a boost of 11% to total revenues saw the consultancy make significant ground on its competitors. Meanwhile ,KPMG, the smallest of the four players in advisory and other services, grew its consulting fee income by 6% to reach revenues of $11.5 billion.
The Big Four have all been highly active with M&A in recent years as a means of driving growth, and – arguably more importantly – entering new markets and consulting segments. Targeting strategy consultancy is one area that has been high on the agenda: all of the Big Four were interested in adding Roland Berger to their footprint, Deloitte acquired financially strapped Monitor, PwC picked up Booz & Company, and EY purchased The Parthenon Group, while Parthenon-EY recently also acquired OC&C’s operations in Benelux and France.
Deloitte, EY, KPMG and PwC have also bought a strong foothold in the creative industry, as they seek to become a trusted advisor to the Chief Marketing Officer too, against a backdrop of growing convergence between the management consulting and creative/design industries. Similarly, the Big Four have significantly bolstered their expertise through M&A in technology, cybersecurity, and law.
Completing the top six are McKinsey & Company and BCG, who are both strong in strategy consulting. Now, on top of more traditional strategic work, both have adapted to life as strong digital players. The pair have successfully leveraged their traditional reputations to gain significant work in the digital transformation market, as businesses across various sectors look to integrate new business models to cope with industry-specific disruption.
While both firms experienced positive growth in revenue, fifth placed McKinsey struggled to make huge inroads into the Big Four’s market dominance, seeing a minimal increase of 1% push their revenues to $7.6 billion. The firm will hope to grow more rapidly in the coming period, which may be helped by a recently won continuation of work with UK supermarket Sainsbury’s, among other new business. Meanwhile, BCG, who were similarly hired by US-based Whole Foods to help the grocery chain cut costs, saw the strongest growth of any firm in the top 10, with 12% revenue increases seeing them hit $5.04 billion in 2016.
One similarity among the top 10 is that they are all strong in digital and technology due to the growth in the field in terms of client demands. With digital transformation consulting now worth $23 billion globally, the top seven providers of consulting services have had to adapt from traditional business and management work in order to maintain their market dominance. The last of the seven, Accenture, is a prime example of this, having pledged $1.8 billion over the course of 2017, chiefly in order to grow its digital offering by way of acquisitions. The firm booked strong growth of 7% to book revenues of $4.6 billion in 2016.
IBM and Microsoft are, in fact, the only two companies featured in the top 10 who could be considered as being from a purely technological background – and arguably could be seen to have suffered from that. IBM is the only member of the 10 largest consulting firms to have recorded negative growth in 2016, with the renowned tech company facing a 4% drop to revenues of $3.3 billion. In May 2017, following disappointing results for Big Blue in the first financial quarter, Warren Buffet’s company Berkshire Hathaway sold a third of its massive stake in the company, further compounding IBM’s misery. Renowned investor Buffet told CNBC, “IBM is a big strong company, but they’ve got big strong competitors too.”
While Microsoft did not suffer the same fate, the company’s consulting growth stood below most of the top 10, with revenues reaching $2.8 billion last year. The 100% product-centric consultancy is the only pure technology consulting member of the list, with its services including the new Azure blockchain council, aligned exclusively to the new Microsoft product suite. US based Booz Allen Hamilton, formed in 2008 after Booz Allen Hamilton split into a public sector and private sector arm (today Strategy&), rounds off the top 10. Seeing 10% growth as revenues reached $2.3 billion, the consultancy recently landed a lucrative role in a $200 million autonomous vehicle contract with the US Department of Transportation.