The GCC consulting market contracted for the first time in its history—down by just over 12% in 2020, with COVID-19 wiping out nearly $400 million in revenues. The market is now worth around $2.7 billion, a new report by Source Global Research revealed.
2020 saw nervous clients put consulting projects on hold, particularly in hard-hit industries, such as retail, hospitality, and aviation, but also mega projects such as NEOM, World Cup 2022, Qiddiya, and more.
AMEinfo interviewed Edward Haigh, Joint Managing Director at Source Global Research, to inquire about last year’s results and next year’s forecasts.
The discussion revealed six key areas consultants need to keep in mind to gradually recoup their losses and continue leveraging the region’s aspirations for sustainable and profitable business and economic development.
“Consultants will continue to play an important role helping clients in all sectors create greater efficiencies in their organizations, but the key for consultants today will be to re-engage and re-align with their clients in this new normal,” Haigh told AMEinfo.
Areas where COVID-19 boosted consultancies
“So much of that initial surge and response to the pandemic has already happened, and as such consulting to the healthcare sector will slow down in 2021, but pick up again in 2022,” Haigh said. “Consultants will bring new solutions and world-class innovation and expertise to bear on the issues healthcare professionals are facing, particularly around engaging with patients, embedding technology in everything organizations do, and providing remote diagnosis and access to healthcare.”
The GCC consulting market also saw growth in the technology market segment in 2020, as the need to rapidly facilitate the shift to remote working drove strong demand of 5.2%.
Cybersecurity services performed particularly well as companies sought to secure remote work, driving growth of 11.4% last year. Source Global Research expects the cybersecurity consulting market to grow a further 30% in 2021, taking total revenues to $236 mn.
While the GCC’s largest consulting market, financial services, took a big hit in 2020, with revenues falling by $160 mn, Source Global Research expects consultants working in this sector to regain their losses in 2021, as banks push forward with ambitious digital transformation projects, spurred on by both customers embracing digital banking and the competitive threat from fintechs.
Consulting bounce back: Forecasts for 2021
Source Global Research is forecasting strong consulting market growth of approximately 17% across the GCC region in 2021.
Some 63% of organizations in the GCC say their use of consulting support will increase over the next 18 months, with an especially strong interest in the energy & resources, technology, media & telecoms, and manufacturing sectors. Healthcare will prove to be an important sector for consultancies as well.
“The current underpinning the GCC healthcare market today is the creation of a state of the art, forward-looking, citizen-centric, healthcare system fit for its time. There is far less legacy that’s being carried forward if we are to compare the GCC with markets such as the US or UK,” Haigh explained. “This presents a far greater opportunity to create a future healthcare system from scratch, and a greater opportunity for consultants to provide support, too.”
6 challenges facing GCC consultancies
1- Consultancy fee rates
Around 44% of clients expect consultants to cut their fees this year, with 13% expecting the cuts to be steep, in contrast to pre-pandemic expectations that 84% of GCC clients expected rates to rise.
The reason provided was that 55% of clients said they believe many firms are qualified to perform the work that needs to be done, driving down rates.
Haigh said: “Given the ongoing pandemic and its deleterious effect on the consulting market last year, one might well expect consulting fees to suffer over the next 18 months.”
2- Freedom of movement
“The GCC’s consulting market arguably relies on two things more than anything else: freedom of movement for consultants and reliably high oil prices.”
While oil prices suffered during the pandemic with average closing prices of $40, 20% less than 2019, oil has rebounded in 2021 and is currently flirting with $65 going to $70, spelling relief for consultancies.
“Access to Qatar has, historically, not been easy and only those who had previously established presence in the country were able to operate there, but enough work exists in other parts of the region— Saudi and the UAE for example—and so attention shifted elsewhere,” Haigh said.
“But to some extent, the events over the past 12 months have helped find a solution to that. For many, instead of having to be on-site, remote consulting proved it matters less whether someone is based in Riyadh or Dubai,” Haigh revealed. “The really exciting opportunity for leaders in Saudi, UAE, and other GCC countries is that this provides access to consultants wherever they are in the world, not just in the region.”
3- Geopolitics and reputational risks
Geopolitics and reputational risk weigh very significantly on the minds of consultancies, according to Haigh.
“The risks are prevalent in the GCC more than anywhere else. They have the potential to cause dramatic changes in consultants’ businesses, whether that’s a market shutting down suddenly, the taps being turned off, or a leader insisting on changing consultancies midstream,” explained Haigh.
“Consultants have helped clients identify some of the problems that they themselves are creating, but honestly, consultants are used to working in these fairly extreme conditions.”
Relative to other parts of the world, those with relationships tend to benefit more significantly in the GCC. In the early days, consultants had to invest a lot of time building those relationships with clients. Spending a year on building a personal and professional relationship before seeing anything in return is quite normal here.
5- Client ambitions
Haigh said consultants don’t mind their clients’ desire to get things done very quickly, but “Consulting firms tend to find themselves cast in the role of naysayers a bit.”
“They are often put in a position where they affirm their ability to perform the project at hand, but have to caution the client that it will take more time than originally allocated,” Haigh said.
“Based on their experience with other projects, consultants are always trying to insert more realistic time frames and find a way to harness and manage their clients’ ambitions and expectations.”
6- Talent allocation
UAE and Saudi have recently been involved in a tug of war to attract business, each easing regulatory frameworks and offering business incentives to pull SMEs, entrepreneurs, and large corporates over to their side.
“This is a healthy competition for supremacy on projects, and it has been a major driver of growth for consultancies for a number of years,” Haigh explained.
“But, I think what is less clear, is how this will impact the market in terms of supply. Saudi is the largest consulting market, but UAE is where most of the consultants are based. And moving consultants between those two countries has been an enormously challenging thing,” Haigh indicated.
Haigh added that there is a real supply issue for consultants across the region, not just in terms of keeping up with demand, but also figuring out who to put where.
“Making sure that the expertise is available on both sides was made all the more challenging with physical restrictions on talent getting into the country, or talent themselves preferring to work in and from the UAE, instead of more restrictive areas,” said Haigh. “Localization efforts in many GCC countries has exacerbated supply challenges.”