The sight of besuited consultants leaving an office in Germany was once a sign to steel yourself for impending layoffs. But times are changing. These days, chances are they’re not coming to tighten operations, but to advise companies on how to modernize for the internet economy.
Consultancy business with top dogs such as McKinsey, Boston Consulting Group (BCG), Bain & Company, Deloitte and AT Kearney is booming thanks to a thirst for high tech strategy in a country that has been severely slow to go digital. A Handelsblatt survey among big consultancies shows expected growth of 10 to 20 percent, with the consultancy sector set to exceed €30 billion ($35 billion) in profit for the first time in Germany this year.
Most recently Deloitte landed a €30 million contract to advise an insurer on its digital strategy, and can now expect a 20 percent rise in revenue this year following 36 percent growth to €440 million in 2016.
Large teams are being requested to design and implement new digital strategies, which has triggered a battle for talent and driven some top consultancies to buy in staff through acquisitions. PwC in 2013 bought rival Booz.
“It can’t be ruled out that (digital) business will make up 10 percent of our total revenue one day,” said PwC’s head of Germany, Norbert Winkeljohann.He told Handelsblatt the company has identified cyber security as a major area following the surge in ransomware attacks such as the WannaCry worm that locked up more than 200,000 computers around the world in May.
“It’s about making data usable as the gold of the 21st century.”
“The big, well-known firms are still attracting enough new blood with the lure of their brand,” said Professor Dietmar Fink, professor of management at the Bonn Rhein-Sieg University of Applied Sciences.
McKinsey plans to recruit 340 new consultants this year. Bain and Roland Berger are each looking for 200 in Germany.
Project demand is expected to continue well into 2018. With the German economy in buoyant shape right now, companies have cash to spend on consultants, big teams are being deployed to help them get ready as quickly as possible for the so-called fourth industrial revolution, the changeover to a new era of big data and smart automation in which factories largely run themselves.
“It’s about making data usable as the gold of the 21st century,” said Walter Sinn, head of German business at Munich-based Bain, which counts the auto industry as one of its biggest clients and expects growth of around 10 percent this year.
“There’s very strong demand right now for support when it comes to analyzing how artificial intelligence and data processing are changing classical manufacturing processes. And then of course there are the scores of mistakes and problems from the past that need to be addressed,” said Carsten Kratz, the head of Germany for BCG.
Despite a slow start into digital times, Mr. Kratz emphasized that Germany is better placed than any other country to master the challenges of the digital age. “In all areas where man and machine must harmonize even better in future, the scientific and technical skills in this country are absolutely competitive internationally. That’s an opportunity that companies must seize.”
Meanwhile smaller consultancies are having difficulty finding staff and already finding themselves stretched to the limit. According to Martin Eisenhut, head of central Europe at AT Kearney, it’s narrowing the competition.
“Those who don’t have the technological know-how for the digital changeover will no longer be successful in the consultancy business,” he told Handelsblatt.
David Crossland adapted this article for Handelsblatt Global. Bert-Friedrich Fröndhoff leads a team of reporters which covers the chemicals, health care and services industries at Handelsblatt. Peter Brors is Handelsblatt’s deputy editor in chief. To contact the authors: email@example.com, firstname.lastname@example.org