Gulf consulting market to bounce back in 2021 after first decline last year

Almost half of regional clients expect consultants to cut their fees this year

The consultancy services sector in Gulf countries is projected to rebound by 17 per cent from a year ago, Source Global Research said. Pawan Singh / The National

The Gulf region's lucrative consulting market is set to rebound after it shrank for the first time in 2020 as Covid-19 forced companies to cut spending.

The market will grow by 17 per cent this year, led by Saudi Arabia, according to London's Source Global Research.

The Saudi consulting market was valued at $1.44 billion after contracting by 11 per cent in 2020. It is expected to grow by 19 per cent this year.

The $580m UAE market is set to expand by 15 per cent while other Gulf markets are expected to make similar gains.

More than six in 10 organisations in the region plan to increase their use of consultants in the next 18 months, with the energy, resources, technology, media, telecoms and manufacturing sectors showing strong interest.

As for their reasons, four in 10 said they face issues they lack the experience to handle while 39 per cent are under pressure to do their work more quickly and 38 per cent are short-staffed due to pandemic-related reasons.

Only 13 per cent said their need to use more consultants is due to digitisation.

However, when asked what areas they plan to invest in, three quarters of respondents cited new technology.

About 44 per cent of clients expect consultants to cut their fees while 13 per cent look forward to steep fee reductions, the report showed.

This is a stark change to attitudes before the pandemic, when 84 per cent of GCC clients said they expected consulting rates to rise.

When asked why they expect rates to fall, 55 per cent said they believe many companies are qualified to perform the work that needs to be done.

“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,” said Edward Haigh, joint managing director at Source Global Research.

A significant minority (38 per cent) of clients predict that fee rates will go up after the pandemic. Of those, more than a third said the need for expertise will drive demand.

The projected rebound comes after the market contracted by 12.4 per cent last year, wiping out about $400m in revenue, the report said. As a result, the market is now worth around $2.7bn.

“The GCC’s consulting market arguably relies on two things more than anything else – freedom of movement for consultants and reliably high oil prices,” said Mr Haigh.

“So, in a year when consultants were confined not only to their country of residence but even to their homes, and when oil prices were not so much volatile as downright absurd, you can imagine what that did to the nerves of the average consultant in the region.”

Health care and technology were the exceptions, growing by 19 per cent and 5.2 per cent, respectively, the report showed.

Much of the growth in healthcare consultancy services was centred on efforts to respond to the pandemic, although ongoing work to define the structure of the Saudi healthcare system had "an impressive momentum of its own", the report said.

The technology segment of the market grew last year as the need to quickly transition to remote working drove demand.

Cybersecurity services performed particularly well as companies sought to secure remote work, driving growth of 11.4 per cent last year.

Source Global Research expects the cybersecurity consulting market to grow by a further 30 per cent this year, taking total revenue to $236m.

While many consulting companies experienced a strong start last year as clients pressed forward with various transformation initiatives, the crisis hit the sector hard.

The pandemic forced nervous clients to put projects on hold, particularly in hard-hit industries such as retail, hospitality and aviation, the report said.