The Danish consulting industry has maintained its growth momentum in 2014, finds a study by the Danish association of consulting firms. Growing demand across the industry, in particular from the private sector, combined with improving financial and tactical operations at firms, stand at the basis of the continued recovery.
Every two years Managementrådgiverne (MR) – the Danish association for management consulting firms (the counterpart of the MCA in the UK) – conducts research into the state of the Danish industry for management consultants. Its study reviews the performance across the industry, spanning large firms (defined by MR as firms with >70 employees) to medium-sized advisories (between 10 and 70 professionals) and small consultancies (<10 employees)*. Firms assessed in its latest review had a total turnover of 2.3 billion krone (based on full year financial data from 2014), which according to the association represents roughly 15% of the industry’s total revenue base.
The data shows that Danish consulting firms have recovered well from the financial crisis and its aftermath. While revenues dropped between 2009 and 2010 by just under 5%, from 2010 onwards the industry managed to break the downwards spiral and across the board book growth. Comparing to 2010, total turnover in 2014 was 20% higher, while levels of export even grew by 40% in the same period, although the latter has a relatively modest impact on overall operations with around a 15% share.
Despite the financial growth of the Danish management consulting industry, interestingly the number of employees active in the sector between 2010 and 2014 remained relatively stable. Ten years ago around the sector generated just over 100,000 jobs, and following the ‘golden years’ between 2004 and 2007, in par with international developments, the employment base rose to nearly 150,000*. Since, the number of jobs rose by just 1% according to MR, an indication of better margins on engagements (e.g. higher average fees) as well as improved levels of chargeability (less consultants ‘on the bench’).
The shifting ratio between financials and employees can too be attributed to improving management of internal operations, says Søren Lund, CEO of TimeLog, a Danish IT services provider which provides the solutions for many of Denmark’s largest consultancies. “The rise of technology allows consulting firms to get much more grip on their operations, from business development and sales to resource management and project delivery,” he says. “And similar to other markets, consultancies have embraced the trend and are using the power of state of the art systems to grow their key financials.” Although it is still too early to come with clear fact-based statements, Lund says that the figures on TimeLog’s around 500 clients in the country do reveal upwards causalities in efficiency, ultimately suggesting that consulting firms “can do more with less”.
A breakdown of the services in the market shows that IT consulting is the largest functional area for Danish management consultants, at almost 20% of the market, followed by operations management and transformation, at respectively 16% and 15%. Compared to 2010, the demand for operations consulting has grown significantly (+6% in market share), riding off the demand wave for topics such as lean, agile and business process management, a movement which is in line with global developments. The share of pure strategy consulting services has to the contrary fallen, by 2% to 15% today, however clients have upped their call for strategy execution, which in the model of MR sits within the transformation segment.
Similar to other countries, the private sector is the largest buyer of management consulting services, accounting for 58% of total spending. Manufacturing, financial services, transport and health & pharma are in terms of volume the largest sectors. The public sector, which consists of the government and local municipalities, hold a 29% share of the spending market, although their role has on the back of government austerity programmes seen throughout Europe been on the decline in recent years (in 2010 their combined share was 40%).
Scandinavian consulting market
According to data from Source Global Research, a UK based analyst firm that examines the advisory industry, the Danish consulting market enjoyed 5.5% growth in 2014, taking the industry to a value of €652 million**. Denmark’s industry is ranked second in Scandinavia, trailing Sweden by just over 20%, ahead of Norway and Finland by a margin.
* As it stands, 85% of the employees are consultants, of which around 10% are partners at their respective firm. The remaining 15% of the workforce span among others back office functions and administrative staff.
** Note that the studies have different calculation models and therefore are difficult to compare. The assessment of Source Global Research focuses mainly on large consulting firms: consultancies with more than 50 employees serving large clients.