French management consulting market grows 8.5% to €5.9 billion

Last year the French strategy and management consulting market enjoyed its best 12 months since the outbreak of the global financial crisis. For the fourth consecutive year growth was booked, up 8.5% in 2016, lifted by a recovering economy and a strong demand for digital transformation projects.

The French consulting sector is currently enjoying its strongest performance in a decade, with growth of 8.5% in 2016 to a total value of €5.9 billion, according to data from Consult'in France. The French association for management consulting firms, France’s equivalent of the British consulting sector’s representative body – the MCA – looked at the financial records of leading management consulting firms to compile its data, gathering statistics from both members as well as non-members.

The present rate of growth in the French consulting sector is higher than that of the UK or Germany, the two economies larger than France within the EU. The recent 8.5% boost to the consulting industry in France builds on 6.3% growth in 2015, and 2.9% growth in 2014. In line with a global economic trend, which the broader European consulting market also experienced, the French segment did experience negative growth earlier in the present decade, however France has booked positive growth in consulting every year since.

Approximately 39% of revenues of the French consulting firms studied was generated abroad. This level was consistent with the share the year previous, as French originating consultancies with large international activities including Atos Consutling, Ayming, Capgemini Consulting, Wavestone (formerly Solucom) and Sia Partners, continue to perform well.

More boutique firms have also branched out internationally, such as Advancy, Estin & Co and Exton Consulting, who expanded their global presence into Munich in April 2017. In terms of headcount, the association estimates that the French management consulting market employs 35,000 consultants, an increase of 11% compared to 2015.

Industry

Financial services (32%), industry (26%) and public sector (10%) are the sectors most used by consulting firms for consulting assignments.

Financial services is the largest industry in France’s consulting market, with a 32% share of the pie, increasing by 2 percentage points in one year. The increase was driven chiefly by the digital transformation introduced by banks looking to leverage FinTech innovations in order to fend off new competitors in the sector. Banking in fact accounts for 69% of engagements within the financial services sector, with the remainder spread across insurance, regulatory bodies and other financial institutions. Industrial services are the second largest sector, which accounts for 26% of market share. The public sector accounts for 10% of the market, just ahead of energy at 9%, although in this segment, players are rapidly growing their investments in environmental consulting activities (e.g. circle economy, CSR, etc).

Functional areas

The largest functional areas of the French consulting sector are strategy (21%), change management (19%), operational performance (15%) and IT consulting (15%). This contrasts drastically with the neighbouring Benelux consulting economies, where strategy consulting has become a far less significant portion of work performed than technology services.

“The consulting market is one of the sectors that is experiencing very good growth while the French economy is struggling to restart. These good results are confirmed at European level as our growth rate is higher than that of the German consulting market”, said Rémi Legrand, President of Consult'in France and an associate at Eurogroup Consulting.

However, although performance across the board was very impressive, Consult'in France’s data shows that there are considerable disparities in performance between firms. Indeed, firms that have been able to make investments to meet the new needs of their clients in the face of the digital revolution have grown. Those that invested in technology, in particular through acquisitions to acquire the necessary know-how (data science, big data, cyber security, Big Data Internet of Things, Industry 4.0, etc) benefitted from double-digit growth. “Those who have remained in a more traditional consulting mode booked moderate growth,” remarked Legrand.

The Big Four have seen massive growth, their consulting units have grown by an average of 19%. Wavestone, a listed group formed following the merger of Solucom and Kurt Salmon's European operations (excluding the retail and consumer goods advisory units), grew by 16%, while Sia Partners recorded organic growth of 17%. In the mid-market segments, it are the medium-sized law firms that are well established locally or active in niche markets that are doing well by advising SMEs, a segment which, for the large part, is not served by the large consultancies.

In terms of fees, prices have changed little since 2010, but a slight upward trend has been observed since 2015. This is contrary to the pattern of downwards price pressure felt among fellow EU-based consulting economies such as Italy and Spain. In Spain particularly, while the sector is worth around €12 billion, with the strategy and management consulting segments performing well, valued at around €2 billion, consultants continue to struggle with raising the low prices they were forced to adopt during the economic downturn in order to maintain a constant stream of business, which some fear they will not be able to move beyond even after the economy fully recovers.

Outlook

Similarly to the Italian consulting market, which since a momentary lapse in 2012 is now performing at a rate that will likely see it surpass 2011 levels of growth by next year, France’s consulting economy looks as though it can expect strong growth of 11% - 12% in 2017, which places the sector in one of the fastest growing consultancy industries in Europe. The high growth points at the fact that the growth is much more than a lifecycle or recovery, but the structural higher demand due to major challenges organsiations are facing, with digital being the thrusting force. Leveraging the demand, 40% of the consulting firms in France say that they envisage an increase in consultant fees in 2017.

Yet, as the market heats up, so too does competition for labour within the consulting sector. Obtaining and retaining talent looks likely to become increasingly difficult in the coming year, as firms fight for consultants who can help expand the client base. According to the data, this year alone the top segment of the industry is eyeing the recruitment of 8,750 professionals, of which some 4,100 will be graduate positions. The association highlights however that getting hold of top talent is increasingly challeening, not just because of competition for top talent, but also because of growing competition from startups. Consulting firms have been led to rethink their employer promise in the face of competition from startups. In a bid to remain good employer, Consult'in France stated that it has noticed consultancies have enriched their employer promise, including work/life balance, international career paths, diversity of missions, diversity and inclusion, and pro-bono projects, to attract the most experienced profiles.

Matthieu Courtecuisse, the founder and CEO of Sia Partners and Vice President of Consult'in France, remarked, “We are expecting growing momentum which will allow the French consulting market to grow by between 11% and 12% in 2017. Major transformations are expected in the field of digitisation and as a result of the Brexit.”

Related: The 20 most prestigious strategy consulting firms in France.