Asia Pacific management consulting industry breaks $50 billion barrier

26 September 2018 Authored by Consultancy.asia

The Asia Pacific management consulting industry is forecasted to break through the $50 billion barrier this year. China, Southeast Asia and Southern Asia are the main drivers behind the growing expenditure on management consultants.

Currently, the Asia Pacific accounts for around 17% of the globe’s management consulting industry, with a market size of $47 billion last year. According to analysis by Consultancy.asia based on data sourced from industry research agency ALM, North America – the United States and Canada – is by some margin the largest region for consulting firms, making up around 55% of the globe’s $277 billion industry, followed by Europe.

In terms of growth however, the Asia Pacific is leading the globe. With economies booming across the region, including Asia being home to the vast majority of the world’s outperforming emerging economies, the Asia Pacific management consulting market has been collectively growing at a steady clip of between 6% and 7% per annum since 2015 – with expectations the industry will climb above the $50 billion mark this year.

Although the levels of industry growth aren’t exceptionally higher than in North America or the mature markets of Europe, the growth figure is an overall Asia Pacific regional average, a region which in respect to the data-set stretches from the Hindu Kush mountains in the west of Pakistan to the tiny island nations such as Samoa and Tonga which make up Polynesia in the Pacific. Naturally, there is sizeable divergence among regional markets.

Size of the Asia Pacific management consulting market ($ / billion)

South Asia

This divergence is of course also notable within regions. The Asia Pacific’s fastest growing management consulting region of South Asia, which has grown by 30% between 2015 and 2017, includes the booming market of India together with Pakistan, Bangladesh, Sri Lanka and smaller nations such as Bhutan and Nepal. And while the management consulting sector has exceptional growth in the region, it still accounts for just 6% of Asia Pacific revenues.

In terms of growth, several factors are given for the rapid increase across the region. In India, Prime Minister Narendra Modi has set the country on a path of economic reform, with the changing local business landscape, such as through an alteration to the country’s foreign ownership laws, driving up the demand for management consultants. The government has also been active in trimming public sector waste through improved efficiency, with expert consultancy required for operational and IT transformations in the new digital landscape.

Meanwhile in Pakistan, reforms have been concentrated in the energy sector, with the country’s natural gas supply in the process of switching from Qatari origin to a supply line from Russia – requiring significant infrastructure planning and investment on pipelines and an overhaul of the supply chain. Additionally, locally active consulting firms are expected to benefit from increased trade between Pakistan and China courtesy of the latter’s comprehensive belt and road initiative.

Southeast Asia

Southeast Asia, categorised together with the countries of Micronesia and Melanesia with respect to the ALM data, is the second fastest growing management consulting region across the Asia Pacific – with collective growth of 25% between 2015 and 2017 for a now 11% regional market share. Again a diverse mix, the region features lesser developed nations such as Myanmar and Laos together with mature economies such as Singapore’s and the rapidly rising ones of Indonesia and Vietnam – with the latter both helping to drive the consulting industry growth.

Likewise on the back of reforms, Vietnam is one of the current hottest markets, with the government slashing corporate tax rates and overhauling the state’s labour laws in conjunction with the establishment of large-scale footwear and textile manufacturing facilities – effectively setting itself up as a cheaper alternative to a Chinese sector which must contend with rising wages and a tapering labour boom. With the potential for relocation, and the many facets involved in doing so, advisory will continue to be in demand across all service segments.

Meanwhile, Indonesia is also being swept along by a reformist government, which among many measures introduced a tax amnesty to stimulate investment – with the country’s M&A sector one of the beneficiaries, bouncing back from a slump to register a remarkable 438% surge in growth for the year to 2017. The government has also pursued IT infrastructure investment, already leading to significant growth in the country’s ICT and digital services market – with the latter expected to grow at a CAGR of 38% to 2020 in a welcome boon to consultants.

Consultancy industry of Asia Pacific – by region ($ / billion in 2017)

Greater China & Mongolia

Experiencing both significant growth and a large market share is Greater China – together with Mongolia accounting for nearly a fifth of revenues in the Asia Pacific and growth of 24% over the past two years. While growth naturally slows as the market share swells, the region is still forecast for double-digit growth in 2018 and 2019, of 11% per annum.

China, in particular, is considered still underdeveloped in terms of management consulting maturity but is rapidly gaining steam – driven by among other factors the unstoppable consumer goods sector and the some $4 trillion being plunged into the aforementioned belt and road project to boost transport infrastructure. Still, some concern remains for the government’s close check on foreign consultancies, with the big names of the global industry are required in certain circumstances to work with local agencies.

Elsewhere in the region, the markets of Taiwan and the special administrative zones of Hong Kong and Macao remain the most mature for management consulting – the latter two focused heavily on the financial services domain – while management consulting in Mongolia is highly concentrated in mining and natural resources sector, with suggestions that the right-wing political tilts in the US and areas of Europe will have implications for the country’s rare earth mineral mining firms as to an uncertain renewables market – such that strategic and operational advisories will be in greater demand. 

Japan & Korea

In comparison to the faster-growth regions of the Asia Pacific, the management consulting market in Japan and Korea grew at a more steady pace of 6% in the past two years. The two countries however together contribute a massive 44% of the Asia Pacific’s total management consulting revenue tally, with firms in the region pulling in over $20 billion in fees. For these nations, consulting spend is predominantly centred on IT and operations services.

In respect to South Korea – which is a global leader in robotics – analysts point to a struggling shipping market and a number of high-profile industry bankruptcies which have prompted the government to set up a multimillion-dollar bail-out fund, with restructuring high on the agenda and turnaround consultancies in potential greater demand. The management consulting market of North Korea, meanwhile, is said to be virtually non-existent.

Management consulting market of Asia Pacific – by region

Australia & Polynesia

The third of the large Asia Pacific management consulting markets, with a 19% overall share, is Australia, which has pushed beyond the $5 billion in recent times with growth hovering around 5%. The country is considered to be the largest consulting market in the world relative to national income. Traditionally, the natural resources and power sectors have contributed the largest consultancy spend, and this is expected to continue as urgency grows to restructure.

Financial services, however, have gained significant ground in recent years, including large spends from the country’s big four banks, with according to some estimates the sector now accounting for almost a quarter of the consulting market. Intended pension reforms are also expected to provide a boon for HR advisories, while government spending – one of the largest income streams – is being threatened by increasing political pressure from the media and public.

Further afield in Polynesia (made up of countries such as Samoa, Tonga and the more developed market of New Zealand, together with French Polynesia, including island states such as Tahiti and Vanuatu), the advisory landscape is slowing picking up through government liberalisation efforts – after historically low levels of activity. As result, consultancies with lines in investment services, market entry and operational set up, along with those in the strategy and real estate domains, are receiving a healthy bump in demand.

Asia Pacific management consulting market – sector sizes (2017)

As an industry break-down for consulting revenues in the Asia Pacific region, the financial services sector is by far the largest management consulting market, more than doubling the next entry for a 13.3% share. Many of the world’s largest banks are based in Asia, and the industry in general is subject to an ever-increasing and complex multijurisdictional compliance burden. On top of this, the burgeoning fintech sector – with Singapore and Hong Kong among world-leading hubs – is forcing the big financial service players to embrace digital or be left behind.

While the financial services market has grown by 20% for management consultants over the 2015-2017 period, the fastest growing segment is in fact healthcare (at a worth pushing $6 billion behind only financial services and manufacturing), with growth of 25% being driven by ageing populations in Japan and Australia, and indeed across parts of Southeast Asia. The two other big sectors in the region are the public sector and natural resources, with growth of 9% and 7%, while communications & media continues to rise thanks in part to a highly competitive market in many Asian countries. 

Big Players

Altogether, across regions, the largest consulting firms in the Asia Pacific include the consulting divisions of all of the Big Four – Deloitte, EY, KPMG and PwC – along with the so-called MBB of American management and strategy giants in McKinsey & Company, The Boston Consulting Group, and Bain. Further big players in the region are Accenture and IBM, A.T. Kearney, Japanese-origin firm Abeam Consulting, Roland Berger, and Marsh & McLennan subsidiaries Mercer and Oliver Wyman.

As a segment breakdown; in the field of human resource consulting, Mercer sits at the top of the tree, followed by Deloitte, PwC and Willis Towers Watson; for strategy its McKinsey, BCG and Deloitte, through Deloitte Monitor and its broader strategy and operations arm within Deloitte Consulting; financial consulting is dominated naturally by the Big Four, with BDO, Grant Thornton, Baker Tilly, RSM and Praxity among other top providers; and for IT services, IBM and Accenture lead the way by some margin, followed again by the Big Four.

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