Consultants Have Their Hands Full

The 2009 crisis is far away; industry is realizing another record year.

Sales are increasing in double digits but profit margins are shrinking.


Germany's management consultants, numbering about 91,000, are burning the midnight oil again and doing good business. In 2011, they realized record sales of EUR 20.6 billion. That's an increase of 9.5 percent compared to the previous year. Even Antonio Schnieder, President of the Bundesverband Deutscher Unternehmensberater (Federal Association of German Management Consultants – BDU), was surprised by the industry's positive development. "In the second half of the year, growth once again increased vigorously", said the head of the German Division of Capgemini Consulting during yesterday's presentation of the industry's figures.

"Clients demand significantly more extensive projects again", confirms Gerd Kerkhoff, head of Kerkhoff Consulting. Until ten years ago, the consulting business still developed anti-cyclically to the economic trend. That means if business was bad, companies would call in consultants. Today, sales curves follow the economy relatively parallel.

Consultancies currently don't notice much reluctance on their clients' part – given a looming euro crisis. But the shock of the financial crisis is still deep-seated. At that time, quite a number of consultancies had sales which partly dropped in double-digit ranges. Currently, however, German companies have good financial cushions. Many of them are using such cushions and calling in consultants to make their business crisis-proof. "Clients are especially asking for strategies in volatile markets", says Martin Sonnenschein, head of the Central European Division of A.T. Kearney. In this respect, consultants are working ever more frequently with scenarios – increasingly also for small and medium-sized enterprises.

Fees have recovered

In addition, projects on sustainability and efficiency increases continue to rate highly. According to Klaus-Peter Gushurst, head of the German Division of Booz & Company, demand is also great for strategies regarding the shift of production to emerging countries like China.

Vehicle construction and the consumer goods industry provide strong sales impetus for consultants. But growth goes across all client industries. Increasingly, financial services providers also ask for consultations in restructuring and risk management.

Fees continue to face tough competition. This is confirmed by Finja Kütz, head of the Germany Division of Oliver Wyman. But a thing of the past are crises years with price battles and considerable rebates according to the motto "take two consultants, pay one!" "In 2011, we moderately increased our fees", says not only the head of A.T.-Kearney, Martin Sonnenschein. According to the BDU, consultancies were able to achieve on average two to three percent higher prices.

"Nonetheless, profit margins are getting ever smaller for consultancies", says BDU-President Schnieder. The reason: Consultants must lure the best recruits with higher salaries – meanwhile, the industry is also paying considerably better. Moreover, most houses invest considerably more in their research staffs and further internal training. Because clients' requirements on the expertise of consultancies are increasing.

For example, Roland Berger just opened up the "Roland Berger School of Strategy and Economics" in Munich. Locations in Peking and Berlin will follow. In the beginning, their own consultants are to receive further training; starting in 2013, clients as well. The industry leader McKinsey also walked new paths with worldwide the first "Capability Center" in Munich for the training of clients' employees. That fits with the trend: According to the BDU, employees of clients are more and more involved in consulting projects. "Turning affected parties into parties involved" – that's what Schnieder calls it.

Customer proximity is an ever more important competitive factor, just like internationalism. "Major consultancies which can do comprehensive and worldwide consulting will continue to grow", forecasts Dietmar Fink, Professor for Management Consulting of the Hochschule Bonn-Rhein-Sieg. Also, special consultancies like Simon-Kucher (price strategy) or Brainnet and Kerkhoff (supply chain) have double-digit growth in lucrative market niches. "In contrast, medium-sized firms with low specialization will have a harder time in the future", says Fink.

But overall, the industry is looking optimistically into the future. For 2012, BDU-President Schnieder expects double-digit growth: "From 2010 to 2020, it's even possible that industry sales will double." That will mean for many consultants: Burning even more midnight oil.

Author: Katrin Terpitz
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