Getting the price right
Clients are in a bind. All our research shows that they have little choice but to use external support, while also having less money to spend. How are they planning to square that circle? By pushing fee rates down even further.
For there to be growth in the consulting and wider professional services industry, four factors must align: Client organisations need to be able and willing to invest; they need to be short of the capacity and/or capability to implement that investment; they need to believe that their success depends on the successful use of technology; and they must be accustomed to using external support. Any one of these things without the others usually won’t result in growth.
However, for the last two years of polycrisis, despite eight out of 10 clients saying their ability to invest has been significantly reduced by economic and political uncertainty, demand for professional services has grown, albeit at a much lower rate than we saw in 2021-22. Three things have enabled the industry to confound expectations:
- The post-COVID Great Resignation left clients unusually short of people: Two thirds of clients we’ve surveyed describe their organisations as being very short-staffed, and rounds of lay-offs have exacerbated that problem.
- Technology is widely regarded as the solution to almost anything: More than 60% of clients believe their organisations must upgrade their technology as soon as possible if they’re to fend off competitive threats.
- Almost all client organisations are accustomed to using consulting support, and around 60% say they rely heavily on outside help.
The result is that 61% of clients tell us that they expect to use more consulting support in the next 12 months.
That doesn’t, however, mean that clients have the money to do all the things they want to do or buy all the outside help they need. Clearly, they’re prioritising—the rate of growth is substantially down from its post-pandemic peak; clients are delaying and cancelling some work, and they’re breaking large projects down into shorter phases. But what they’d really like is to buy more for less. Fifty percent of clients now think that consulting fee rates will or should fall—the highest it’s ever been in our research, up from 27% last year and just 5% in 2019.