Middle market clients: What makes the difference when delivering advisory services?

The attractiveness of the middle market to consulting firms waxes and wanes with the economic environment. During periods of growth, focusing on selling and delivering large projects to large client organisations makes perfect sense: Although the cost of sales can be very high, the scope and duration of projects create ample opportunity for significant profits. By contrast, mid-sized organisations have smaller projects and are more price sensitive.  

So, the fact that the questions we’re being asked most frequently at Source today are about the potential of the mid-market is a sign of just how challenging growth continues to be for consulting firms. Does it make sense for firms to invest in this market? The answer depends on whether the needs of mid-market clients will require firms to invest in new distinct offerings, and if they do, whether this will prove profitable when times are hard and every investment dollar counts. 

Are mid-market clients different? 

In many respects they’re not. That shouldn’t be surprising: After all, mid-market clients are facing the same challenges that larger ones are. However, in one particularly important respect, they are different—and that’s their attitude to AI.  

Mid-market clients are more likely to say that AI is having a positive impact on their organisation, to be discussing the use of AI at senior leadership levels on a day-to-day basis, and to be making it a strategic investment priority over the next 18 months. Our Market Trends survey data also suggests that they are planning to make targeted investments in technologies like agentic and generative AI in the next 1-2 years.

Will mid-market clients spend more on consulting support?

Although mid-market clients are almost as likely as their larger peers to say they expect to use more external support next year (66% versus 68%, respectively), how these different organisations perceive ‘more’ use and their expectations of firms may be substantially different. And so, while we can’t draw any conclusions about the amount of money being spent, we can identify some clear differences in what mid-market clients spend their money on. The answer is, again, AI.

With fewer expert resources to draw on, mid-market clients are more likely to say that having access to AI and data & analytics skills will be critical in the next three years, and that they’ll need external help around data privacy regulation and cyber in the short term. They’re also more worried that integrating new technology will be a barrier to achieving their corporate goals. In our view, all of these factors are likely to drive increased demand for consulting work around AI.

The flies in the ointment 

Mid-sized client organisations therefore represent an important opportunity for consulting firms to expand their knowledge of how best to deploy AI for clients in practice. The projects may well be smaller, but that means that problems can be resolved and results evaluated more quickly.  

But every silver lining has a cloud—and in this case there are two. The first is that consulting firms have become more cautious about the extent to which they’re prepared to invest in AI-related services. We’ve argued against that but recognise that disappointed expectations over the last 2-3 years have reduced investment in this area and putting more money in, specifically in the mid-market, may trigger eye rolls at senior leadership levels. The second is that, in our experience, the main drawback of working with mid-market clients is that they tend to see consultants as staff augmentation, using them to help deliver their business-as-usual, here-and-now commitments, and are more likely to use their own resources for anything cutting edge.  

Our conclusion? Our research shows there’s a genuine opportunity for consulting firms to do more work with mid-market clients. However, success will depend on serving up more than cut-down versions of large-scale projects. It will require firms to make a longer-term investment in this segment to understand how to apply their learnings to the mid-market. 

What can firms do next? 

Source has conducted extensive research into the needs of the mid-market. To access this data and speak to our experts about how these insights can be applied to your firm’s offerings for this valuable market, get in touch here. 

We also have a Future Trends report coming up soon, which takes a deep dive into the needs of mid-market clients. Contact us to be notified when this report goes live.