New 2023 benchmark: Consulting industry defies turbulence and crisis
In many ways, 2022 has been one of the most challenging years for businesses worldwide. Yet, the consulting industry is defying the challenges and delivering great results.
We might be many years into the future before any of us need to be reminded why 2022 was a challenging year for business.
War, inflation, higher interest rates, supply chains under pressure and an unstable world situation between the superpowers.
In this environment, growth and prosperity have nevertheless managed to sprout in the consulting and advisory industry, according to SPI Research's international 2023 benchmark.
SPI Research delved into over 100 operational and financial KPIs from 709 companies to take the industry's temperature.
Here are three of the most prominent industry trends I read in this year's benchmark.
Trend #1) Revenue growth and profits are solid - even among the weakest companies
During the Covid-19 crisis, we saw that the gap between the best and worst-performing companies widen dramatically.
While negative bottom lines hit the weakest, the strongest managed to increase their lead to over 30% profit (EBITDA).
By 2022, the gap seems to have narrowed.
While the strongest are earning slightly less this year (23.5% EBITDA), the bottom line of the weakest 25% has averaged 7%.
Overall, the industry has seen a stable profit margin of 16% on average.
And unlike in 2021, many companies don't have to struggle to survive with red bottom lines anymore.
Trend #2) Remote and digital delivery has taken hold
In the aftermath of pivotal events, it's always interesting to see if new trends were just a ripple in the storm - or if they're here to stay.
I've asked myself whether remote/digital project delivery was a phenomenon that belonged specifically to the years of the Covid-19 crisis. And it would return to some form of business as usual. Or whether companies have re-engineered their workflows to a degree where remote is the norm, rather than the exception.
The SPI Benchmark shows a slight increase in the share of work done physically at customer premises (35%) compared to 2021 (34%).
But we only have to return to 2018 for that figure to reach 53%.
This supports my feeling when I talk to clients and networks.
Most HAVE redesigned their work to be more flexible, more employee-friendly (especially for families with children) and far more efficient than when a consultant spent most of their time on the road.
Trend #3) The industry is looking for digital solutions that support new needs
Even with rampant inflation dampening the purchasing power of businesses internationally, software investment grew by 7.1% in 2022, according to a forecast from Gartner - and is forecast to rise to 9.3% in 2023.
The same trend can be seen in the SPI Benchmark, where the consulting industry increasingly adopts systems such as Professional Services Automation (PSA).
PSA solutions yield several core benefits to PSOs, but most executives only need to look to the relative 6% (from 67.6% to 71.5%) increase in billable utilization as a primary reason to select PSA.
This tells me that we are still riding the wave of change brought on by the Covid-19 crisis.
As employees become more remote and business models change and become more flexible, managers need systems to stay in control of their businesses - without getting lost in micro-management through Excel sheets.
Sneak peek at some of the benchmark's other KPIs
In this blog post, I've focused on three clear trends. But the benchmark offers a range of operational and financial KPIs:
- Employee turnover is still high (13.8%)
- Trust in management is less than during Covid-19 (page 82 in the benchmark)
- Projects are getting bigger (6.44 months on average)
- But fewer are being completed on time (76%)
- Most companies are managing their projects through centralized resource management (46%)
- Deal pipeline/quarterly forecast dropped to 162%, and discounts increased to 8% on average
You can dive into a wealth of relevant data in the benchmark yourself.
TimeLog has sponsored it for six years in a row - therefore, it is free for you.