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Is the tide turning in the German consulting market?
The overarching narrative within the consulting market over the last decade has been about the inexorable decline of traditional strategy consulting, and of a more practical, implementation-focused brand of consulting emerging in its place.
The numbers bear out the extent to which that’s hurt some of the most prestigious names in the consulting industry: in the UK strategy firms now account for a little over 17% of the market, while the advisory practices of the Big Four (which, in all but one case, didn’t even exist some 15 years ago) now have a 38% share.
You’ll find a similar story in most mature consulting markets around the world. But not in Germany. While it would be wrong to suggest that the major trend of the last few years has bypassed Germany entirely, strategy firms have proved remarkably resilient. In fact, across the DACH consulting market as a whole (of which Germany is by far the biggest part) strategy firms retain the biggest share: 35%. That’s precisely double what it is in the UK.
Indeed, so dominant are strategy firms in Germany that we’ve had to adjust our methodology for assessing market attractiveness, because by one of the measures we look at (average revenue per consultant) the DACH market is so far out in front that it’s virtually impossible for it not to end up topping our index every year. Average revenues may, indeed, be higher here than elsewhere, but it’s the structure of the market that’s most different.
Could that all be changing though? Our latest report on client perceptions in Germany suggests that it’s technology firms, not strategy firms, that are now the most admired: Asked about the quality of consulting firms’ work across a wide range of services, clients ranked IBM Global Business Services top, followed by Accenture, and BearingPoint. And while that hasn’t yet translated into mindshare–McKinsey is still the most talked about firm–let alone market share, it might be a sign of things to come. Why?
We think the answer is digital. It doesn’t automatically follow that an interest in digital leads to an uptick in positive sentiment about technology firms–indeed, in many markets we find strategy firms in a commanding position where client sentiment is concerned–but it does appear to level the playing field. It makes technology the business of strategy firms and strategy the business of technology firms. And everything the business of Big Four firms. Elsewhere that’s looking like good news for strategy firms (perhaps because they’ve been shut out for too long) but in Germany the rebalancing goes the other way.
But positive sentiment isn’t market share yet. To achieve that, technology firms are going to have to impress on a tough German audience (we know, we talk to them) that they have what it takes to talk strategy at the highest level of an organisation, and to link that to their well-established technology capability.
The door is open. Will technology firms walk through it?