Digital transformation consulting market booms to $23 billion!
The booming digital transformation consulting market is worth $23 billion today, according to a report. In total, the sector now represents more than 15% of the entire consultancy industry, while taking root most extensively in the UK, US, and Australia.
A new report from Source Global Research has found that the global digital transformation market was worth around $23 billion to consultants in 2016. Currently standing at twice the size of the UK’s overall consulting industry, and five times the size of the consulting market in China, the report from the research and analyst firm shows that the global digital transformation market now accounts for £2.26 billion of the UK’s entire £7.31 billion consulting market.
While occupying around one-fifth of the UK’s market, digital transformation (DT) consulting has also taken hold of the USA and Australia. In America, digital transformation represents 20% of the consultancy landscape, at $11.79 billion per year, alongside $996 million, or 21%, of the Australian sector.
The professional service researchers found in a separate report earlier in the year that consultants in the UK already stood to make significant capital of the uncertainty surrounding Brexit – while the Management Consultancies Association (MCA) published a wish-list for the UK general election calling on future governments to increase spending on education, particularly in STEM subjects. The country faces economic turbulence in the face of its withdrawal from the EU, and with digital transformation being touted as a route to future growth, the boom in this area of consulting stands to see this year’s record growth sustained if companies continue to prioritise technologically centred change.
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Surveying client organisations about the factors driving investment in digital, Source Global Research’s report found that while efficiency remained a top priority across the board, the biggest driving force behind digital investment was the need for growth. 52% of respondents stated growth as one of the two most important factors driving investment in digital transformation, with the figure rising to a further 73% among respondents from the industry’s largest competitors, defined as organisations with annual revenues of $5 billion or more.
When clients were queried regarding plans to change their investment within in the next two years, most expected their companies’ biggest areas of expenditure to involve changing business models at 70%, while another 69% stated improving underlying technology infrastructure would most likely be a key goal. However, when the sample was narrowed to larger organisations, a majority of 86% said they would be increasing investment connected with making changes to their business model; potentially creating massive demand for work which looks set to benefit strategy consulting firms above over all others.
Source’s analysis has further confirmed this, finding that digital transformation now accounts for about a quarter of all strategy work in the world. According to previous data from the firm (FY15-16), the largest part of digital consultancy is related directly to technology, standing at around $9.7 billion, with another very significant portion of roughly $5.3 billion already strategy work.
While the figures seem to suggest strategy firms are best placed for the next phase of digital transformation growth however, the paper stated that they have not yet asserted their dominance on the market – and are by no means guaranteed to do so simply by being in the right place at the right time. According to Edward Haigh, Director of Source Global Research, “going forward, no matter which firm type you are, your reputation with the board and your ability to advise clients about their business model will matter most.”
Of the clients interviewed, 61% surveyed in the US said that they were already involved with, or were planning, initiatives related to artificial intelligence (AI), lending further credence to reports that global industry stands on the brink of an automation revolution. Earlier in the year McKinsey & Company found while just 5% of jobs could be completely replaced by technology, over 60% of all activities may become automated by 2055. Meanwhile fellow management strategy consultants Roland Berger projected huge uptakes in AI within the global automotive industry.
Source’s report sees this as confirming a future boom in management consulting, as while the opportunities surrounding this demand will initially spring from the integration of new technologies into existing business models, the potential of AI and its associated robotics market also mean in all likelihood a global realignment of the workforce will occur – with consultants being required to help companies plan for the human and financial consequences of automation.
Following on from this, Source also forecast seismic shifts in demand for HR and change management consulting. While researchers last year calculated that this line of professional service work accounted for a minute 2% of the broader digital transformation market, they concluded that the sector’s potential for growth was therefore one of the largest. According to the analysts, a recurring theme across digital transformation likely to cause this projected boost, is that Chief Information Officers in tech-centred businesses will most likely bring in strategy firms and the Big Four; while Chief Experience Officers in less digitally specialised companies will seek expert advice from technology consultancies.
Eventually however, once automation and digital infrastructure become the norm across the board after the digital transformation market matures, the researchers expect in the future they will witness more traditional professional service lines come to dominate the sector. For example, their paper also noted that operational improvement stands to gain ground. In this regard, analysts hypothesise that the digital transformation market will remain fluid, as a constantly morphing arena in regards to changing technology, alongside the transforming understanding of clients of the potential for digital transformation.
With thanks to Consultancy UK