U.S. financial institutions spend $14.8bn on consultants as attention switches to regtech and robotics

• U.S. consulting market grows 7.1 per cent to $58.7bn in 2016

• Cyber-attacks force U.S. companies to ramp up spending on cybersecurity consultants to $7bn

• Federal procurement keeps a tight grip on consulting spending

As the strain of regulation lessened across the U.S. financial services industry, financial institutions nevertheless increased their consulting spending by more than $1bn in 2016—a 8.3 per cent increase to a total value of $14.8bn—as they sought to implement new technologies, such as regtech, AI, cognitive computing, and robotics. Financial services outperformed the wider U.S. consulting market, which grew 7.1 per cent to $58.7bn in 2016.

Robotics provided consulting firms in the U.S. financial services industry with the most tangible opportunities, with the automation of simple processes forming the bedrock of this work.

These findings are published today (23rd May 2017) in a new report from the leading research and strategy firm for the global management consulting industry, Source Global Research. The report also revealed that an explosive digital transformation market played a big role in wider consulting market growth, as did a hot demand for cybersecurity work (up 30 per cent to over $7bn), as clients made steps to safeguard their digital empires.

Fiona Czerniawska, Director of Source Global Research said:
“2016 was a strong year for the U.S. consulting market, with a direct link between digital transformation and the best performing industries, as clients’ desire to get ahead of their competition fueled demand in financial services, retail, and TMT. A tougher year was had by those consulting to the public sector, where a challenging procurement landscape put pressure on fees and made winning work difficult.”

Other key findings from the 2017 Source U.S. Consulting Market report include:

- The pharma market was the fastest growing for consultants–up 11.9 per cent to almost $2bn ($1.92bn) in 2016.

- Federal procurement keeps a tight grip on consulting spending–the public sector market for U.S. consultants grew just 0.9 per cent to just over $6bn in 2016.

- The Affordable Care Act continued to drive work for healthcare industry consultants–up 7.9 per cent to $6.75bn.

- The consulting arms of accounting firms–a group dominated by the Big Four–dominate U.S. consulting–growing by 10.2 per cent[2] to $21.5bn in 2016.

- Technology was consulting’s biggest and fastest-growing service line in 2016–worth $14.78bn, up 10 per cent in 2016.

Commenting on the increasing interest in robotics in financial services, Thomas Puthiyamadam, U.S. Management Consulting Leader, Global Digital Services Leader, PwC, added:

“Robotic Process Automation (RPA) in finance is taking off like a rocket. Clients are aiming to completely transform how the finance function works. The potential was there a year ago, but now they're looking at how to make it a reality.”

Government procurement feared by consultants

The Source report found that rigorous procurement departments in government are feared by consultants, and the Obama administration’s preference for firms owned by under-represented groups made it tough going for some consulting firms. The report says that these challenges were compounded by intense price pressure and the drip-feed release of funds for consulting.

Fiona Czerniawska, Director of Source Global Research said:

“While it’s very early to say definitively how the Trump administration will use consulting firms across the public sector, the hiring freeze put in place for the first 90 days has already created additional opportunities.”

The Big Four dominate U.S. consulting

A combination of organic and inorganic growth made the consulting arms of accounting firms—a group dominated by the Big Four—the fastest growing firm type in the market in 2016. The report says that part of this growth is related to a backdrop of M&A activity, the most notable of which was Deloitte’s acquisition of Heat—another indicator of their intention to build a strong position across the digital spectrum. This intent was shared by the rest of the Big Four.

U.S. consulting clients more enthusiastic than clients globally

U.S. clients are not only more enthusiastic than they were last year but are more enthusiastic than their peers across other geographies. The majority (82 per cent) of U.S. clients expect to increase their consulting spending in the 18 months running from January 2017 through June 2018. Last year, just 67 per cent said their consulting budgets were going up. Globally, just 70 per cent of clients say their consulting spending will increase over the next 18 months while 12 per cent anticipate a drop.

For For more information on Source reports contact alice.noyelle@sourceglobalresearch.com or telephone +44 (0)20 3795 2668/