The past twelve months have been challenging for professional services, with limited pockets of good performance in some services and geographies. Fiona Czerniawska, CEO at Source, set the scene: “There were fears that the market would contract last year, but our data doesn’t show that. What is clear is that the market is patchy, with technology services being the out-and-out highlight.” 

Improved client sentiment will be what drives the recovery, but that, like much else, cannot be guaranteed. “Eighty five percent of clients tell us that they lack confidence, and so it wouldn’t take much to knock them back off course. Clients’ biggest fear is that things will get worse, and they think the current crisis will carry on for some time,” Fiona said. With that fragility in mind, Fiona suggested that a rapid return to double-digit growth in the consulting market wasn’t on the cards: “It’s not like that post-COVID moment where there was a huge amount of pent-up demand and excitement. It feels as though the recovery will be more gradual—it’s getting better, quite slowly but quite definitely.” 

Oliver Jones, who is EY Global Strategy and Transactions Markets and Sustainability Leader, summed up his thoughts with the term “cautious optimism”. “Some of the economic data are quite optimistic, but geopolitically the outlook is still very mixed,” he said.  

“There are areas of the business where we’re definitely more optimistic and others where we’re still less so,” Oliver explained. “In our Strategy and Transaction division, we often think transactions are a bit of a leading indicator, and we’ve been optimistic in that space for probably a year now, and it’s still not quite back to usual. But there are definitely some green shoots […], particularly with the US transactions market beginning to come back more strongly in certain sectors, such as energy and life sciences.”  

Macroeconomic drivers  

When it comes to geopolitics, until recently some clients had been relatively immune from its more challenging effects, but this dynamic has now changed.  

Oliver, who also heads up EY’s specialist global geopolitical advisory team, said: “Sectors like oil and gas have always been affected by big, geopolitical issues. And if you’re a pharmaceutical company, for example, you’re often dealing with regulators. But for most sectors, over the last 30 years, the world has become friendlier: More places you could invest in, more places you could source from, more places you could sell to […] Now, that process of liberalisation has come to a stop.” 

Oliver continued: “There’s a degree of selective deglobalisation—almost all sectors, and consulting is no exception, are now affected by it. There are very few sectors that aren’t affected by these very consequential geopolitical trends.”  

“There’s a different set of drivers at the moment, and some of them are incredibly urgent drivers,” Oliver Jones

So how are clients responding to these challenges?  

“They’re doing the things that they’ve always done in response to consumer pressures and economic pressures,” Oliver said. “They’re looking at their supply chain, at how they can sell better, at efficiencies, at implementing tech changes, or whatever it might be. They’re doing the things that we have been helping them with for a long time—it’s just there’s a different set of drivers at the moment, and some of them are incredibly urgent drivers. [Clients] aren’t saying: ‘In 10 years’ time, I need to clean up my supply chain design.’ They’re saying: ‘I need to relocate my supply chain around the world by next year, or I’m in real trouble.’” 

Diving into sectors 

It’s clear that clients are still making the big decisions that they need to make to keep them profitable and competitive into the future, but where will they be investing in professional services? Geographically, Fiona flagged the GCC as the star region and reflected on the fact that the US tends to bounce back more quickly than most of the rest of the global market.  

Delving deeper into which consulting areas are set to perform well over the short to medium term, there is one glorious winner: tech. “The simple answer is technology will perform, and anything you can do on that is probably going to perform very nicely,” Fiona said. “That also covers a wide range of things that are not immediately technology—data analytics falls into that space. Clients are interested in innovation that falls under the tech umbrella and in productivity improvement, which is about technology these days too,” she said. 

When it comes to the consulting areas that haven’t performed so well: “People & change work is under pressure, and strategy work also suffered, but now we see it starting to pick up,” Fiona revealed.  

Untapped opportunities 

Perhaps most intriguing are the untapped areas, where consultants would be advised to take a closer look. Here lies strong latent demand from businesses. However, while clients say they are very interested in particular consulting services, this isn’t translating into spend just yet.  

“Clients are thinking a lot more about how they are going to grow than they were six months ago,” Fiona Czerniawska

“Growth opportunities are a good example of this,” Fiona explained. “Clients are thinking a lot more about how they are going to grow than they were six months ago—they have moved away from just looking at ways of cutting costs.  

“They’re expecting a low-growth environment, but they have ambitions and growth targets they have to meet. However, the proportion of clients who say that this is the area where they are most likely to use outside help is tiny—it’s between two and five percent,” she said. 

So why aren’t clients investing in consulting services in this area; an area which will clearly be critical to their success? “Clients seem less sure about firms’ capabilities here,” Fiona explained. “They know consultants are great at doing all the back-office things, like M&A, analysis, transformation, but they aren’t sure if firms can help them grow their business.” 

In these challenging times, there are clearly places that firms will want to invest in their services—with technology being the surest bet—but there are some other potentially big wins that may take a little more effort to tap into. 

“I think there are opportunities for consulting firms around growth, but those offerings will take time and innovative thinking to produce,” Fiona said.  

Emma Carroll, Head of Content, Source
If you would like to discuss any of the data in this article or have questions about which services, sectors, and regions are set to perform in the months ahead, then please get in touch.