Regulatory pressure fuels sharp rise in consulting work for tech giants

Growing regulatory pressure on tech giants has fuelled a sharp rise in consulting to the high-tech industry, according to new research.

Despite a challenging year in which the global consulting market is forecast to shrink by 13%, growing regulatory pressure on tech giants has fuelled a sharp rise in consulting to the high-tech industry, with revenues expected to rise by 11% to almost $6 billion in 2020.

These findings have been revealed in a new report from Source Global Research, which also found that this strong growth in high-tech consulting has helped the wider technology, media and telecom (TMT) sector’s performance, with consulting revenues forecast to expand by 2% to just over $14 billion in 2020.

Regulatory scrutiny for tech giants drives consulting work

The growth of risk and regulatory work continues to be a key driver of consulting demand in the high-tech industry as tech giants continue to come under increasing scrutiny, and have moved into the sights of regulators. For instance, the CMA are planning new guidance to clamp down on tech giants giving away their products for free.

At the same time, organisations have been seeking support to deal with the changing international trade landscape, as they look to abide by the rapidly changing rules around what can be sold, and to whom.

Consultants have also benefited from organisations looking to rapidly expand and repackage their offerings as a result of the Covid-19 pandemic.

Gordon Tucker, managing director and Global TMT Industry leader at Protiviti, commented: “Risk and regulatory work is one of the key areas we’re looking at as a growth market. The EU has led in this area, but in the US there’s growing regulatory focus on the largest technology companies. One can sense the movement towards a more regulated market. Overall though, this sector is going to face an increase in global regulatory scrutiny in the years to come.”

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Consulting market growth in the telecom industry is forecast to grow 10%, due to the resumption of the 5G roll-out.

In stark contrast, consulting growth in the media industry is expected to shrink by 38% and figures are unlikely to return to 2019 levels until 2024. This is because consumer behaviour has changed in a hugely significant way, and as such, advertising revenues in the industry have fallen, leaving organisations with much lower consulting budgets.

Martin White, senior analyst at Source Global Research, said: “High-tech and telecoms organisations are particularly well-placed to help people through the crisis: Businesses and individuals are looking to telecoms and technology to provide remote working solutions, and companies like Zoom are far from just a business conference call service now. Of course, some businesses in these industries have seen revenues fall as some customers cut their spending, but there are clearly growth opportunities out there.”

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Demand for deals expertise remains strong

The deals market remains active, as high-tech companies in particular look to extend their reach in existing markets and seek opportunities to break into new markets.

Organisations in the TMT sector are more likely than those in other sectors to be thinking about expansion; many high-tech and telecoms clients have seen rising revenues as a result of the crisis, and as such have more money to spend on acquisition strategies.

For these organisations, the pandemic presents an opportunity to capitalise on the acceleration of changes in consumer behaviour.

Peter Mercieca, global chair for media and telecommunications at KPMG, said: “A lot of that work [M&A] is being generated by a combination of private equity and their ongoing interest in the high-tech world. There are a lot of opportunities in that space that companies are going to want to take advantage of.”

White added: “Compared to other sectors, a higher proportion of TMT clients tell us that they already have the expertise required in-house but lack the capacity. In other words, they’re using consultants for body-shopping, rather than for their expertise, and they expect lower fees as a result.

“Firms that can convince clients that they can provide expertise as well as capacity may be better placed to maintain their price levels.”

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Nick Ismail

Nick Ismail is a former editor for Information Age (from 2018 to 2022) before moving on to become Global Head of Brand Journalism at HCLTech. He has a particular interest in smart technologies, AI and...

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