Eastern Europe's consulting market has, despite a turbulent political environment, recorded solid growth last year, expanding 5% to reach a total value of €1.1 billion. Geopolitical tensions and mixed signals from governments and corporates means that the outlook for 2016 and beyond is uncertain, with low growth the most likely scenario for the region's consultants.
According to data from Source Global Research (Source), an analyst firm that keeps track of market developments in the global management consulting industry, Poland was the fastest growing consulting market in the region, growing by 7.2% to €426 million. Both the Czech Republic (up 5.9% to €168 million), and Slovakia (up 5.6% to €75 million) also grew faster than the wider market. Romania, the region's second largest consultancy space, booked just 1.6% growth to €184 million, with Hungary also experiencing a tough year, growing 1.9% to €126 million.
Across the board, the region has seen solid growth since 2012, when the Eastern Europe consulting market was valued at €912 million. Growth rates of 7.6% and 5.3% saw the industry break through the barrier of €1 billion in 2014, while last year the total fee income of the largest consultancy firms in the region* was assessed to be worth €1.1 billion.
Service line / Industry
Technology consulting is the biggest service line in Eastern Europe, growing 6.8% to €378 million, and it's also the fastest growing, partly thanks to work relating to digital initiatives. According to the authors, the region is seeing a good deal of demand for traditional IT work, with digitisation gaining momentum, although digital maturity still lags a good distance behind the world's largest economies. Over the next few years, emerging trends such as the Internet of Things (IoT) and Industry 4.0 are expected to become big forces.
A view of consulting spending by industry reveals that all sectors enjoyed at least some growth in 2015, though some did better than others. Financial services (up 6.1% to €466 million) and retail (up 5.9% to €54 million) were particularly good sources of work thanks to digital disruption becoming an issue for clients in these areas. The majority of projects in the digital landscape were largely about customer experience.
In manufacturing – an industry which saw 6.8% growth to €122 million – a lot of the work was happening in Eastern Europe's vigorous automotive industry, where clients are particularly interested in operational improvement (shop floor excellence, supply chain optimisation) and Industry 4.0. HR & change management was also a hot topic for auto manufacturers, with strong interest in leadership development and cultural change.
Growing influence from the West
The report by Source further notes that a growing share of consulting assignments in Eastern Europe initiate in the West. "Whether that comes in the form of local projects directed by foreign headquarters or work for Western clients that's been "nearshored" to local consultants, assignments with roots outside the region have become bigger business over the last few years", write the analysts.
For 2016 and beyond the prospects look mixed. In terms of countries, most will do well, forecast the researchers; Poland is however set to face a challenging year, and given its enormous share of the market it risks dragging down the overall growth rate of the region. Eastern European consultants are also mixed in their view of client demand. The say they see a strong desire to pursue consulting engagements, yet at the same time they worry it could be a long time before clients have the discretionary funds to take action.
In addition, the turbulent political environment is top of mind for many of the region's consultants, with many concerned that a wave of right-wing sentiment, the heating political ties with Russia and Euroscepticism will discourage foreign investment and put critical EU funds at risk.
With a market size of $55 billion the United States is the globe's largest management consulting industry.
* Source's analysis looks at the revenues of consulting firms with more than 50 consultants.