U.S. Consulting Spending Tops $58 billion in 2016.
U.S. companies increased spending on consulting by 7.1% in 2016 as more businesses sought advice on cybersecurity, according to a report by Source Global Research released Tuesday.
Spending on U.S. management-consulting reached $58.7 billion last year. The pace of hiring outside advice rose the fastest in the pharmaceutical industry, up 11.9% to $1.9 billion. However, financial services companies maintained dominance over the market, accounting for about a quarter of total consulting spending at $14.8 billion, up 8.3% from a year earlier.
U.S. spending on cybersecurity advice was the fastest-growing segment, up 30% to $7.1 billion, according to the report.
Cyber threats are continuous, as criminals develop new ways to break into corporate computer systems. This is spurring demand for advice on the topic and is likely to transform cybersecurity consulting into a standalone market, said Fiona Czerniawska, director of Source Global Research. “I can’t see how it stops.”
Still, big consulting firms are behind the curve when it comes to taking on cybersecurity issues, she said. Those consultants were late to recognize the opportunity, and missed out on hiring technology specialists that would give them the necessary skills in that area, Ms. Czerniawska said.
Meanwhile, pharmaceutical companies are seeking out consultants in greater numbers, according to the report. This includes mid-size companies that are willing to invest in advice about complying with regulations, cutting costs and seeking new avenues for growth.
“Consulting firms are pretty good at understanding regulation and how it’s likely to happen, they’re pretty good about how to get compliance organized, they’re good at talking to a regulator, they’re good at cost management,” Ms. Czerniawska said.
The challenge for consulting firms is to rebrand themselves as fountains of strategic advice, as many companies relegate them to management-advisory roles that focus on optimizing back-office tasks, Ms. Czerniawska said.
“They probably need to think about their image a bit, because they’re not people you jump to when you need to grow your business,” she said. “Consulting firms often have the ideas, but they’re not given the platform on which to talk about them.”
Consulting spending slowed during the middle of the year due to uncertainty surrounding the United Kingdom’s exit from the European Union and as a shock result in the 2016 U.S. presidential race looked more likely, according to the report. While few clients held back on consulting projects, many pushed for a clear return on investment from consulting work.
Looking ahead, President Donald Trump’s administration and its efforts to roll back regulations could boost U.S. spending on consulting in 2017, Ms. Czerniawska said.
“They’ve made money taking regulation in and they could make money taking regulation out,” she said.
Ambiguity in U.S. policy and in the administration’s goals, however, is likely to hurt the consulting sector. In industries that are anticipating big regulatory change from the Trump administration, clients are postponing spending on advice until there is more clarity from Washington, according to the report.
Read the full article on Wall Street Journal.