The US consulting market continues to perform strongly. Last year the globe’s largest management consultancy market nearly reached double digit growth, expanding by 9% to over $50 billion. While a strong domestic economy partially fuelled consulting market growth, digitisation is driving demand for consultants across every function, in every sector.
In recent years the US consulting market has been one of the star performers of the global advisory industry. The home of consulting giants such as McKinsey, BCG, Bain and Deloitte has despite the ailing crisis years been on the rise for more than five consecutive years now, reveal several studies from analyst firms. According to Source, a UK-based analyst firm that specialises in the consulting landscape, the US management consultancy industry was worth $36.2 billion in 2011, reaching $41.5 billion by 2013.
In the most recent edition of its US market research, Source highlights that the US market is booming, with growth in 2014 reaching 9%, a rate typically reserved for emerging markets. The market is assessed to currently be worth over $50 billion say the analysts, adding however that a change in definitions and baseline figures for 2013 data has made comparisons with previous years no longer possible*. With a turnover of over $50 billion, the US market is nearly 8x the size of the UK consulting market, and more than 11x the size of the Australian advisory market.
Financial services sector fastest growing
The US consulting market’s biggest customer: financial services, was the fastest growing industry sector – up 11.9% to $12.4 billion in 2014. Regulation continues to be a big driver of activity, but there’s also a growing amount of work connected with digitisation. Lynne Doughtie, Vice Chair Advisory at KPMG, comments on the strong growth in financial services: “Financial services companies are asking themselves how they're going to grow in the future. They still face regulatory and cost pressures, but they pulled almost all the levers where efficiency is concerned and they now have to look at how they can improve their top line.”
Both the second and third biggest US consulting sectors grew strongly: Energy and Resources up by 9.6% to $6.8 billion and Manufacturing up 8.9% to $6.5 billion, largely due to growth in the automotive sector. Key drivers for demand include streamlining complex manufacturing processes, developing and implementing innovations and new business models and working on upcoming topics such as driver connectivity and the driverless car. According to a recent study from BCG, the autonomous car market is set to grow to $77 billion by 2035, making it an increasingly ripe sector for consultants.
From a service perspective, the big riser was Financial Management and Risk, which grew by 11.8% to $16.2 billion in 2014. Aside from regulatory work, cybersecurity is driving a lot of work for consultants as it has moved up the corporate agenda in recent years just as it has moved towards the front pages of newspapers. Technology services also grew strongly, up 8.9% to $12.7 billion. Going forward, the analysts expect this growth to continue as over three-quarters of US clients (76%) said their spend on technology will increase over the next 18 months.
Looking ahead, Source, which interviewed 32 senior partners and consultants, says the outlook for the industry is bright. “US consultants are some of the most optimistic in the world, and many think 2015 will be even better despite a tough first quarter. Many report strong pipelines, with a book of work stretching well into the fall and beyond”, comments B.J. Richards, one of the co-authors of the study.
M&A in particular is forecasted to book impressive growth. Fuelled by low interest rates, high volumes of cash, and the robust economy, M&A activity globally and in the US is rapidly picking up, as also illustrated by two recent analyses from EY (56% of global firms chasing M&A) and Bain & Company (PE-backed healthcare buyouts reach 3 year high). M&A engagements are bringing consultants a steady stream of work ranging from due diligence all the way through to post-merger integration, and with growth back on the table, consultants expect M&A work to come back with a vengeance. “We think M&A will be really an explosive source of growth in the next 12-14 months: clients are more active, are fending off more competition, entering new markets, and are exploiting new technology”, says Thomas Puthiyamadam, U.S. Management Consulting Leader at PwC.
Despite the positive outlook, it’s not all sunshine everywhere, warns B.J. Richards, referring to the clouds on the horizon for consultants in the energy sector (as oil prices continue to be depressed) and in federal government (as austerity cuts are still hovering above markets). “But even these bits of gloom can’t distract from what is a dominantly sunny forecast”, she concludes.
Note that the market definition by Source focuses on consulting done by mid-sized and large-sized consulting firms (those with more than 50 consultants) and typically includes work carried out for mid- and large-sized clients. The consulting market for (very) small firms and/or freelance consultants is excluded from the sizing. Other analyst firms typically apply a broader definition (both in terms of market scope and functional definitions), and hence present larger market estimates. See the page ‘Global consulting market’ for details.
* According to source, the revision made reflect improvements to the research model.