Fears about an economic downturn in the US have been waxing and waning for many months now, but growing disquiet is now being fuelled by some hard facts, with a slowdown in GDP growth in the second quarter of 2019, and a recent troubling downwards revision of 2018’s growth rate, writes Zoë Stumpf of Source Global Research.
This is being eyed with concern by many consulting firms for a number of very good reasons. While the relationship between healthy GDP growth and a flourishing consulting market isn’t completely symbiotic—with some good opportunities for restructuring and cutting costs coming out of any economic slump—there is clearly a strong link between the two. Moreover, that nasty in-between time when it looks like economic growth could falter in the longer term, but no one is quite sure, can be a particularly hard time for consulting firms, as clients tend to just sit on their hands faced with this type of uncertainty. Add in to this mix some likely loss of appetite for big spend that may well be a feature of the market in the run-up to 2020’s Presidential election, and the pipeline of major new projects could start to look a little thin on the ground.
The impact of all of this could be felt the most keenly by the very largest firms that have done so well out of the years of good economic growth in the US. Their ability to invest in the latest solutions, operate at the cutting edge of digital technologies, and provide strategy through execution capabilities have meant that it is these big players that have been best positioned to reap the growth opportunity presented by client’s need to transform and digitise.
However, current economic uncertainties mean that this could be set to change. Clients tell us that they have long been eager to explore what niche firms can offer but, in many cases, have been hampered by the need to use a big brand with broad reach to help them with their mission-critical large-scale transformation work. But with more tactical needs relating to efficiency and cost likely to move to the top of client’s agendas, a whole host of opportunities could open up for smaller, nimbler—and crucially—cheaper players. This could set the scene for something of a rebalancing of the market, with the biggest firms no longer in poll position. 2020 could well turn out to be the year of the boutique.
Zoë Stumpf is a leading commentator on the consulting industry at Source who provide specialist research on the management consulting market to consultants and their clients.
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