Markets are what you make of them. Henry Ford knew it when he introduced the “any colour so long as it’s black” Model T Ford. Faberge knew it when he produced the first of his brilliant, bejewelled eggs. Big or small, high value or low cost: We get to decide, writes Fiona Czerniawska of Source Global Research...

For all the work we do in sizing the global consulting market (hint: it’s big), we’re acutely aware that there’s another, hidden market out there (hint: it’s much, much bigger). Where do you find this? First, you question your instincts; second, you re-think your value proposition.

I’m going to take analytics consulting as an example of what I mean here, because for the first time we’ve really tried to understand the scale of the market that we don’t see. Our report on Intelligent analytics estimates that the global analytics consulting market was worth $24bn in 2017. As with so many relatively new consulting services, analytics consulting cuts across our conventional definitions (strategy, operational improvement, etc.), so year-on-year growth doesn’t just come from increased demand, but from the extent to which analytics is eating into other consulting work. It’s a market that looks set to continue growing. Data we gathered from senior executives in the US for the report showed very positive views: 91% said that the use of analytics had already generated value for their organisations. However, it also showed that almost as many clients are investing in building up their own in-house skills in this area—and the largest organisations are the most likely to do so.

The US accounts for by far the largest slice of this market, $13bn we estimate in 2017. However, the Fortune 500 companies based in the US employ around 138,000 people in work that has some element of data science and analysis in it, ranging from R&D experts, through supply-chain planners to marketeers. Based on an average salary of $73,000 (which is probably a bit low, but bear with me), that’s costing these corporations something in the range of $10bn a year. If we assume (based on interviews we’ve carried out with some of these big organisations) that the work these people carry out is 75% data collection, cleaning, and basic analysis, and 25% high-end analytics, and we apply to these an estimate of what these people would cost these corporations if they were external consultants rather than in-house resources, we get to $39bn. Theoretically, then, the analytics consulting industry in the US, which today is worth $13bn, could be worth $52bn.

But challenging our assumptions about what is, or could be, our market is only part of the story. Clients we speak to cite three main reasons why they’d prefer to build up their own in-house analytics resources than to turn to external consultants for help: Analytics is a core activity in which the performance of their organisation in part depends; in-house data scientists are often perceived to know more about analytics—especially in the context of a specific organisation—than outside consultants; and internal people are cheaper. To convert some of the money currently spent on in-house analytics into external consulting opportunities will depend on having a credible response to these three points. For example, it will mean creating a partnership-style arrangement with a client, in which the consulting firms provide a managed service (a combination of experts, software, and proprietary data), rather than the traditional hit-and-run approach. Within that service, the experts will have to be genuine experts, and it will have to be a joint team made up of consultants and the client’s own data scientists, with each learning from the other. With salaries for data scientists rising steeply, the cost differential between internal and external resourcing may look after itself, but consulting firms will also need to use their own data-gathering and analytics tools to automate some of the work.

Many of us operate with an instinctive sense of how big a market is: We cast ourselves as passive observers, when we could be taking an active role in creating the market of the future.

To see an extract of the intelligent analytics report, click here.

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Fiona Czerniawska is a leading commentator on the consulting industry and a co-Founder of Source who provide specialist research on the management consulting market to consultants and their clients.