Insiders project superb growth outlook for US consultancy sector

Bullish confidence is the new normal among C-Suite executives in the US consulting market. Overwhelming majorities of thought leaders are projecting strong revenue and profit growth for 2017.

Confidence in the US consulting industry is robust and near unanimous among thought leaders and decision makers. ALM’s 2017 Executive Outlook report surveyed more than 100 senior consultants, finding that an overwhelming majority had faith that the year will conclude on a wave of strong industry growth.

Their optimism is not unfounded. In 2016 the US consulting industry, by far the largest and most mature in the word, registered annual growth of 7.1%, reaching a value of $58.72 billion. This was not an anomaly but came on the back of five years of impressive growth figures.

ALM reported that two thirds of industry leaders expect 2017 growth to outpace last year’s and surpass the 10% mark. Consulting industry clients are falling over themselves to get one step ahead of digital transformation trends. Industry insiders are supremely confident that this demand will translate into higher revenue and profits in the short term.

Interviews conducted with consulting firm executives at the tail end of 2016 found that 91% were projecting their company’s revenue to grow by more than 5% in 2017. A rare 98% majority expected the US consulting economy to register at least some growth.

Talking profits

In last year’s Executive Summary, eight in ten consulting firm leaders predicted a rise in their net profits. For 2017 that figure soared to 96%. A healthy majority of 57% expect that consulting industry growth this year will see their firms enjoy an increase in net profits that exceeds 10%.  

Optimism among leaders that their consultancy will record higher profits in 2017 is clearly high. But it falls slightly short of the titanic confidence expressed in the future success of the US consultancy sector as a whole.

The confidence gap between industry revenue and company profit growth can be explained by several factors. One lingering hangover of the recession years is a pressure to reduce client fees. As the consulting industry diversifies and smaller specialists emerge alongside agile and ambitious new entrants, boasting their own disruptive and innovative technologies and strategies, clients expect better value for money and will look around for the best deal.

Helping them are companies such as Talmix and blur, which colonize the emerging match-making niche, setting up clients with consultancies through efficient and tailored attention to their needs. Now tasting their own medicine, top consultancy firms are realizing that they can no longer assume client loyalty merely on the strength of their reputation.

These internal market dynamics were ranked among the top concerns felt by respondents to the ALM survey. Keeping consultancy thought leaders awake at night were issues of profitability, client retention and new client business, ALM found. Potential external hiccups in geopolitics and broader sales cycles will be fretted about another day.