Italian and Spanish consulting markets return to growth
After years of decline the management consulting markets of Italy and Spain have returned to growth. Also the outlook for 2014 is positive, claims a new report from British consulting analyst firm Source.
Over the past years the consulting markets of Southern Europe have strongly been impacted by the financial crisis. During the height of the crisis years (2008 – 2010) the Italian and Spanish consulting markets contracted significantly, and even in its aftermath in 2011 the market contracted in size, with 6% in Italy and 3% in Spain. New data from Source reveals that despite the fact that both economies continue to struggle, the consulting industries have rebounded.
Italian consulting market
In 2013 the consulting market of Italy remained flat - growing by just 0.6% to approximately €1.05 billion. Financial Services remained the largest and fastest growing sector by some distance - up 2.9% to €296 million due to demand from regulation, modernisation, and digitisation projects. Healthcare was the next fastest growing market (2% to €29m), though it remains the smallest industry. From a service area perspective Financial Management & Risk and Technology where the largest and fastest growing services in the Italian consulting market – both growing by 2.2% in 2013. Regulatory work, cybersecurity, and bankruptcy-related services drove demand in financial management, while technology benefited from both traditional IT work and an interest in the cost-cutting potential of new digital tools.
Spanish consulting market
Following the 3% decline booked in 2012, the Spanish consulting market rebounded last year, growing by 0.8% to just over €1.1 billion. The Financial Services sector continues to dominate the Spanish market: consulting revenues in the sector grew by an impressive 3.9% in 2013 to €286 million, largely off the back of a regulatory offerings. Revenues also increased in the Energy and Resources sector, growing by 2.3% to €136 million, also mainly again due to regulatory work. The best performing service area was – similar to Italy – Financial Management & Risk, growing by 2.1% to €149 million. Technology, the largest service line in Spain, recorded growth of 1.6% to €521 million.
Outlook
According to the analysts the 2014 outlook for both markets is positive. The Spanish consulting market is forecasted to grow by 6%, 4% higher than the expectation for the Italian market. Nevertheless, the message for individual consulting firms is clear: competition in the marketplace will continue to intensify, and changes in business models will be required. In both markets the battle for consulting spend is fierce, eventually leading to a downwards pressure on prices and margins. This will accelerate three trends already visible in both markets: firms will be forced to take on unprofitable projects, further consolidation in the marketplace will take place and in the case of Spain, firms will increase their focus on other Spanish-speaking markets such as Central and South America.
Note that the market size estimates of Source differ from those of other analyst firms. For instance, Kennedy values the consulting market of Southern Europe at $12.2. billion, significantly more than the valuation from Source. The difference can for a large part be attributed to the definitions used. Source defines the consulting market as ‘management consulting services’ yet excludes areas such as tax advisory, audit, the implementation of IT systems, the delivery of outsourced/offshored services, HR compensation and benefits administration. In addition, the revenue estimates only take into account mid-sized and large-sized consulting firms (>50 consultants) and focuses on the work they execute for mid- and large-sized clients. See the section Market Segments for more information on market definitions.
