The consulting industry in emerging economies has been enjoying booming growth, according to Plunkett Research, and the company has declared Africa the "next consulting frontier".
"Consulting services are definitely booming in emerging economies and it is becoming a new way of doing business in Africa, especially for local companies in Africa that want to be competitive with other multinational companies and big corporate organisations," explains Gerhard Hartman, head of department for the international division at Sage VIP.
According to him, the reason for this is twofold. "Multinational companies expanding into Africa are accustomed to the business value of consulting services, and therefore expect the same quality of service when starting to do business in Africa. At the same time, local companies, which are familiar with the basic package of buying the software and taking responsibility for the installation and training thereof, are starting to see the business value of consulting services."
Suren Govender, technology consulting MD at Accenture SA, agrees with this: "Emerging markets are experiencing rapid growth in demand and scale, which in turn drives increases in capacity, time to market, quality and product diversity. Consulting services traditionally lend themselves well to address these needs and can exponentially improve benefits by leveraging technology."
He believes the delivery of new products and services in emerging markets is as much a local/regional focus as it is a focus from multinationals. "Local competition can be formidable as they are able to leverage their scale, presence and brand. Whether one needs to build scale and introduce a new brand or organically grow an existing presence, the use of technology and R&D provides the differentiation to deliver to diverse needs," he explains.
Furthermore, he identifies that a key differentiator for doing business in emerging markets is that these markets offer an innovation ecosystem, largely driven by historically having to solve their own problems in a unique local way, or through developed market "reverse innovation" enhancements. He adds: "Capabilities required for success in emerging markets are strategic capabilities, governance and leadership models, management systems, and people and team capabilities. All of these are core delivery strengths of consulting services engagements."
Negative perceptions
Kobus Jansen van Rensburg, head of consulting and solution sales at T-Systems, believes there is a challenge to the way the term 'consulting' is perceived.
"Where the term 'consulting' has been used to bring in contractors in order to augment a skills gap in certain sectors - particularly in the public sector where a large proportion of the budget is spent on contractors for specific IT-related services - consulting services have developed a certain negative perception."
However, he continues, consulting as a service is used in most sectors within organisations that intend to change their sourcing models. "Consultants bring a wide range of knowledge, from market information to specific technology expertise, that can assist organisations to make informed decisions," he explains.
Furthermore, Jansen van Rensburg believes consulting services as well as outsourcing, particularly in the IT space, are booming in emerging economies. "This is due to the fact that many of these economies, such as SA, are in the throes of an ICT skills dearth, and as new emerging technologies gain traction, consulting and outsourcing are the answer to this challenge. Furthermore, outsourcing delivers additional benefits such as cost efficiencies and access to technologies without the necessary capital investment," he states.
Jansen van Rensburg believes a consultant can help to bridge the gap between business, IT and the market. "Consultants have the information, knowledge and experience from first world countries that have already gone through these changes and can help organisations in emerging economies to keep up with the fast pace of technology, business demand and the need for innovation."
Developed vs emerging
According to Govender, there are three main ways in which consulting services in developed economies differ from those in emerging economies.
Firstly, there's the need to innovate at speed. "For emerging markets to be able to loosen their financial dependency on the developed world, their differentiation has to come in the form of 'leapfrog' innovations that set them apart and create incremental value," he says.
A consultant can help to bridge the gap between business, IT and the market.
Kobus Jansen van Rensburg, T-Systems
Secondly, Govender believes a big difference lies in creating interdependent ecosystems rather than solving for point-solutions. "At the rate of growth in emerging markets, it becomes necessary to deal with parallel solutions across multiple industries. This requires intimate local knowledge as well as understanding of the dependencies between economic drivers," he explains.
Lastly, Africa's population forecast is to reach almost two billion by 2050. He says: "Between 2010 and 2050, Africa's active/working age population will grow from 56% of the continent to 66% - a striking contrast to more mature continents whose populations are ageing and moving into the dependent category."
Developed economies have become more conservative as a result of the global economy, according to Jansen van Rensburg, driving their focus around governance, increasing stability, standardising processes, compliance and corporate responsibility. "In emerging economies, organisations are looking to leverage new opportunities arising from new technologies, including the cloud, mobility, collaboration and digitalisation. Consulting services in these markets therefore focus on assisting organisations to leverage technology in order to enhance business, increase innovation and take advantage of growth opportunities," he says.
According to Hartman, in developed economies, companies have been exposed to consulting services in IT and they require a total solution, from purchasing the software to implementing, supporting and training the staff on the software. "Countries in developing economies might want the same type of service, but cannot afford it. In this case, you need to change the consulting services model to adapt to a customer's specific budget. In such cases, the supplier of the consulting service will, for example, only provide support during installation, but not provide ongoing project support," he explains.
According to Greg Vercellotti, executive director at Dariel Solutions, the cost of consulting services are more affordable in developed economies due to the fact that demand is low as skills are readily available. "In developing economies like SA, however, you find that we have very strong first world consulting capabilities and innovative solutions, but are restricted by challenging environments. Additionally, our skills shortage makes consulting services much more expensive."
Highest potential
According to Plunkett Research, the fastest growing area in consulting is IT, and the IT consulting segments with the most potential at the moment are big data, cloud computing and mobile services.
Jansen van Rensburg agrees: "Specifically, they can help organisations in their path to 'cloud readiness', and provide the skills and resources necessary to enable organisations to leverage the advantages of 'on-demand' services."
"Mobility is another area for growth, where consultants can provide expertise, advice and assistance. Bringing innovation into organisations is the primary role of the consultant in this market, and there are many opportunities within the health, education, transport and energy sectors all looking for ways to provide services in a cost-effective way."
According to Govender, communications and technology, public services, consumer goods, resources, and financial services are all areas with high growth potential in consulting services.
He says emerging markets have seen rapid growth in telecommunications services mainly through mobile adoption. In 2013, almost 50% of Africans - more than 500 million people - will own a mobile phone, compared with 30% in 2008. "There are huge opportunities for all industries to further benefit from the widespread use of mobile technology, so telcos have to become more efficient, creative and pervasive," he explains.
Furthermore, he believes the emerging market economic demands are emphasising the need for governments to play a bigger role in gestating business and public services for the sustainability of the local economy. "Service delivery efficiency and access to basic services will benefit appreciably by addressing the rapid urbanisation, loosening of trade restrictions and population growth. Rapid growth in population and urbanisation will also place additional constraints on infrastructure requirements, mandating greater levels of planning and urban investment from public and private sector players alike."
Emerging markets are experiencing rapid growth in demand and scale.
Suren Govender, Accenture SA
Govender also explains, despite currently low per-capita income levels in Africa, average wages are growing, giving rise to an emerging middle class that will become more demanding as income levels and spending increases. "However, as the spending power of the middle class grows and consumption increases, business is also faced with operating in an environment with poor infrastructure and the lack of formal systems and processes, which can be addressed through enabling technologies and process design."
Additionally, Govender explains, many emerging markets have not yet fully exploited their resources' potential. "In addition to being able to harness much-needed capital and revenues, well designed and built resources ecosystems will ensure balanced, long-term growth."
Finally, Govender points out, the immaturity of the financial services sector in many emerging markets lends itself tremendously to the role that consulting services can play in modernisation, transformation and digitisation strategies to effectively augment their economies.
Hartman believes telecommunications, banking and the mining sectors all have high growth potential in consulting, as multinational companies within these industries have more of a tendency to expand into Africa.
"These multinationals have been part of developed economies and thus are accustomed to consulting in IT. When expanding into the developing economies, they would like to make sure the platforms are standardised to ensure that reporting is easier when looking at consolidated financials. Local companies in developing countries are also starting to invest in consulting services in order to stay competitive with the multinational company," he concludes.
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