Why is data & analytics work the world’s most expensive consulting service?Data & analytics is a big market, and it’s about to get much bigger. But it’s not just the volume of client demand that’s driving growth…
Big data, stored in and conveniently accessed via cloud technology, and the rise of ever more sophisticated analytics has transformed the consulting and wider professional services market over the last decade.
This type of work appealed to clients who were looking for more evidenced-based ways to run their business, a perception that was magnified during the pandemic as organisation after organisation began to realise how poorly equipped they were to respond to a rapidly changing environment: “We’re driving blind,” said one senior executive we interviewed at the time. “We thought we knew how our business performs—and it turns out that we don’t, at least not to the level of detail and precision we need.”
The result is a professional services market that, we estimate, was worth $60bn in 2022 and which is primed to grow by 12% in 2023, ahead of the global forecast of 8%. However, this figure is likely to be an underestimate. Data & analytics has become so pervasive that it’s hard to separate it from other types of work—as becomes clear when we break the visible part of the market down by type of firm. The market is split approximately 54:46 between the technology-led areas of data storage and machine learning, and work that is more focused on business needs (analytics and data visualisation).
Technology firms—not surprisingly—dominate the technology-led market. Yet, in the business-led space of advanced analytics and visualisation, the gap between technology firms and other types of firms narrows with creative agencies, information/market research firms, and the Big Four all having significant market shares—and indeed ones that are larger than that of data & analytics specialists.
In data we’ve collected since the start of 2023, 25% of organisations across a range of sectors and major markets (DACH–Germany, Austria, and Switzerland, France, the Gulf region, the Nordics, the UK, and the US) said that data & analytics is an area where they’re most likely to spend significantly on consulting support, a figure that rises to almost 30% among CXOs.
But growth in the data & analytics market isn’t just being driven by an increasing volume of demand. One of the most intriguing pieces of data we’ve gathered this year has been about fee rates.
Data and analytics: The most expensive market in professional services
We asked over 3,000 clients, from a wide range of different geographies, to indicate how much they’d expect to pay for different types of consulting services. There’s significant variation in the responses, which is predictable when we take into account the fact that every project is unique, involves a specific combination of capabilities and services, and can be fulfilling a different role in an organisation (a project’s visibility among very senior executives tends to push fee rates up, for example)—let alone factors such as discounts agreed in the last stages of contract negotiation. But even with all those caveats in mind, it seems significant to us that the average daily rate (across all geographies, sectors, and types of firms) for a data & analytics partner is just over $6,500, higher than for a strategy partner.
Why is data & analytics work the world’s most expensive consulting service? We’d suggest two reasons.
The first is that high demand isn’t being matched by supply. In recent research on the European consulting market, we found that data & analytics capabilities were second only to cybersecurity in terms of both their importance to client organisations and their scarcity. Fifty-six percent of clients said data & analytics skills are very important to their businesses, and 25% said this know-how is very difficult to recruit.
The second reason is less obvious but probably more profound. Our research has consistently indicated that clients are roughly half as likely to say that consultants have created value than they are to say that consultants deliver high-quality work. Data & analytics, by bringing hard evidence of impact, helps close the gap—and, as our fee rate data shows—is likely to play a critical role for professional services firms in an uncertain economic environment.