top of page
Search
  • Kennedy Research Reports LLC

Business as Usual or Permanent Shift?

Updated: Jul 11, 2023

Download full report below

KRR-Blog-Growth - July 2023
.pdf
Download PDF • 221KB

What Are We Seeing?

The headline for the first six months of 2023 has been layoffs by some of the largest global consulting providers.


Weakening demand appears to indicate a reversion to the pre-Covid norm as companies digest new market conditions. (Covid’s impact on consulting demand resulted in more than 20% total growth from 2020-2022).


Layoffs would be expected as buyers tell us that demand for consulting in 2023 is softening. More than half of our buyer panel report either cutting consulting spending or holding it steady; only one-quarter expects growth to exceed 5%.


What's Behind the Story?

While it differs by degree, we see similar patterns of spending across different geographies, industries, and functional roles.


There is, however, a significant difference when it comes to company size, with small and medium-sized (SMEs) companies reporting continued growth in consulting spending while large companies pare their spending. ​


While large companies across sectors are cutting back on consulting expenses, they are directing more investments into R&D fueled by Data and Analytics (DnA). This could have a substantial impact on consulting going forward.


Why Does It Matter?

Consulting market growth forecasts highlight the impact of softening demand but obscure underlying drivers and the longer-term outlook. If this were a classic chaos-fueled, boom-bust spending hangover, we would expect spending to revert to historic norms over the next 12 months. But that's not what appears to be happening.


Instead, continued lagging spending could portend a seismic industry shift that threatens classic consulting business models. That's because DnA was the single largest contributor to consulting growth during the 2020-22 Covid boom, and global companies were the largest consumers of those services. Yet the drop in consulting demand among those buyers has not correlated to a corresponding decline in demand for DnA services. Instead, those large companies are increasingly engaging directly with DnA “hyperscalers” (e.g. Amazon, Google, Microsoft) and analytics pure plays. This shifts a good portion of those companies’ DnA spend – the fastest growing portion of spending – away from traditional consulting providers. The shift is compounded by companies then narrowing the scope of the consulting work that remains.


The looming question for the consulting industry is whether this displacement to “new” DnA providers is permanent or whether traditional consulting providers can claw their way back into the DnA landscape.


Our next installment will examine how consulting providers are changing business models to confront the DnA challenge


(c) 2023 Kennedy Research Reports LLC


170 views0 comments

Recent Posts

See All

Comments


bottom of page