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Industry Updates

Forecast: Consulting Firms Adjust to Declining Demand

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Organizations are looking for help in making improvements to supply chains battered by the pandemic-caused disruption. But many firms that would ordinarily help them with such challenges appear to be hurting, too.

The global management consulting industry is expected to lose around $30 billion in 2020, due to travel restrictions as well as clients wanting to delay, downsize or cancel projects, said Beroe Inc., a procurement intelligence firm. An expected, lingering economic slowdown suggests the next few years will be “challenging” for consultants, it said.

“The management consulting industry is expected to shrink across the globe,” Beroe said. “Travel restrictions due to COVID-19 have impacted the management consulting industry as, typically, management consulting professionals spend nearly 80 percent of their working lives away from home. Organizations are stabilizing their bottom line by eliminating discretionary expenses, limiting hiring and also reducing the use of external advisors. This will reduce the demand for consulting services and cause a revenue dip for the global management consulting industry.”

However, Beroe added that large firms and those with a “strong technology footprint and/or well-established client relationships” are likely to do well during this period.

Like many other industries, management consultants are doing more of their work virtually. “Consulting firms might take up a digitally centered approach and provide services at a lower cost due to elimination of travel expenses,” Beroe said. “Demand for consulting services might decline due to cost cutting by client firms. In addition, the consulting billing rates are expected to drop by 10 to 15 percent, with the drop in rates varying by service line.”