The writer is Edward Haigh, Joint Managing Director at Source Global Research, a prominent provider of research about the global professional services market.
The GCC consulting market closed out the last decade in style, posting growth of 9.9% for 2019 and reconfirming its status as one of the most exciting and high-growth markets for the world’s leading firms. But against the backdrop of the Covid-19 pandemic, and the royal decree in Saudi Arabia banning the use of foreign consultants in public sector work, challenges lie ahead.
Saudi Arabia continues to be the main engine of growth for consultants in the GCC: Now worth $1.6bn, it’s the biggest market in the region by some distance and grew by an impressive 12.1% last year. The more mature UAE market—worth $916m—also made a significant contribution to the overall total, with growth of 7.2%.
Sitting behind those numbers are investment programmes, aimed at delivering economic diversification, that are almost bewildering in scale. Indeed, set within the context of a global consulting market dominated by big transformation programmes, Saudi Arabia’s Vision 2030 programme still manages to look like the mother of them all. However, the opportunity that presents is accompanied by a significant degree of risk.
The royal decree served notice of that risk, although it doesn’t appear to have had a major impact so far. An outright ban would of course have significant impact, but the insistence that public sector organisations simply try to use local firms wherever possible quickly runs into an obvious stumbling block: There aren’t nearly enough of them with the scale and skills needed to service the demand. No doubt that will change in time, but time is a scarce commodity in Saudi Arabia these days, and for as long as the drivers behind Vision 2030 remain pressing, the pressure to use foreign consultants will remain. Still, the knowledge that their biggest client wants to find a way to stop using them will keep the regional leaders of the big international firms on their toes.
Of course, in the short term it’s a situation that’s been superseded by the Covid-19 pandemic, which serves to illustrate how much the supply of consultants to the Kingdom currently relies on a fly-in-fly-out model. With a travel ban currently in force, consultants and their clients now need to think creatively about how they can continue to make progress on projects while working remotely. Inevitably, this will be much easier for some types of projects than it will for others.
Although it’s a situation that will be brought into especially sharp focus in Saudi Arabia, there are wider implications for the region’s consultants. We expect the impact to be threefold:
- First of all, some clients will stop existing projects, especially those that require consultants to work on site extensively. Work concerned with redesigning business processes, for example, will likely be shelved for the time being. By contrast, strategy work, because so much of it can be done remotely, is likely to be much less impacted.
- In the second instance, some sectors will be more severely impacted than others. This is unlikely to be a particularly good time for consultants serving the region’s airlines, but those serving sectors with a need to rebuild supply chains, such as manufacturing, might actually experience increased demand.
- Thirdly, there’s the wider economic impact: It now seems likely that the pandemic will push the world economy into a recession, and while governments may find ways to continue investing in major transformation programmes, private sector companies who find their profits constrained are likely to try dialing down their reliance on external support.
It’s a shame, because sitting behind these threats to the health of the GCC consulting market are that appear overwhelmingly benevolent: Before the Covid-19 outbreak, 84% of clients (senior end users of consulting services) we surveyed in the region said, with so much in the pipeline, they expected their consulting expenditure to rise. And, with so much going on—not just in terms of government-led transformation programmes, but also in an exciting and rapidly-evolving digital space—the GCC market still appears to hold much promise.