BABES-BOLYAI UNIVERSITY, FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION
Author: master student Daniela-Marinela Vararean-Cochisa
Coordinator: Associate Professor Emil Lucian Crisan
Collaborator: AMCOR (Romanian Management Consultancies Association)
Analysis of the management consulting market in Romania
from the perspective of digitalization and virtualization
The 21st century, especially its second decade, has been characterized by major technical and technological transformations, in particular by a high degree of digitization and computerization that have a strong impact on a large number of industries worldwide, also reaching the consulting sector at national level.
Consulting firms carry out activities both internally and at the level of client organizations, being confronted with the tendency of digitization and virtualization from both perspectives: on the one hand, in order to ensure their own competitiveness on the market, and on the other hand, to redesign and improve the business models of their clients, in order to achieve superior performance.
Although the total turnover in the management consulting industry in Romania is continuously increasing from year to year, according to the studies conducted by AMCOR (Association of Management Consultants in Romania), the conditions of competitiveness for the consulting companies are changing, both due to the innovative technologies introduced on the market, and due to the modification of customers' requirements. Due to the new challenges, consultants need to continually review, critically, the portfolio of their offered services and rethink the traditional model of face-to-face consulting. To determine the current state and future trends regarding digitalization and virtualization in the Romanian sector of management consulting, we conducted a study between December 2019 and February 2020, the respondents of our study being micro-enterprises and even large companies.
In this way we would like to thank AMCOR Romania for their support and assistance in disseminating the questionnaire to its members and to all those who have spent time in providing the requested data.
The present study, entitled "Analysis of the management consulting market in Romania from the perspective of digitalization and virtualization", aimed at identifying some trends in the field regarding the two stated issues, digitization and virtualization. As a reference study, we used the analysis carried out by Nissen in 2018, on the German management consulting market. In order for the study to be carried out, we started the process by completing, with the help of the Google Forms tool, an online questionnaire, which was disseminated, via email, among 223 companies active in the Romanian consulting market in management, of different sizes: from very small companies to large companies, scattered throughout Romania, both members and non-members of AMCOR. On February 29, 2020, we registered a final number of 30 anonymous respondents who provided data, resulting in a response rate of 13.45%.
The questionnaire comprises 18 questions, which concern the point of view of the consulting firms on the analyzed topic, and were grouped into 3 categories of information:
- general information regarding the respondents of the study, including data on the consulting areas, average number of employees of the company, the industries in which they act, gender, age, experience and the position respondents have in their companies;
- information on the current state of the analyzed sector from the perspective of digitization and virtualization of services, including questions regarding the predisposition towards digitalization, the level of virtualization of services, the reasons for integrating the classical methods with the modern ones, technologies used, the level of acceptance of the clients regarding technologies, respectively billing models of the provided digital services;
- information on future trends and developments of the analyzed sector, which aimed to collect data on security and confidentiality issues, consultants' opinions on the combination of classic and digital consulting models, on how the essential competences will change, respectively the types of transformations in the business model and trends of the consulting industry.
In the next paragraphs details the results of our study are shortly presented.
1. General information regarding the respondents of the study
1.1. Management Consulting Domains
It was observed that systems development and their integration, as well as IT consultancy are among the rarest areas among the represented companies, while the strategic, operational and process management are the most common among the participating companies.
1.2. Average number of employees
Regarding the size of the participating companies from the perspective of the number of employees, the study was attended by very small (0-5 employees), small (6-10), medium (11-50) and large (51-250 employees) companies, predominant being within the sample very small companies - in proportion of 56.70%, followed by small and medium companies - 20%, and the percentage of respondents from large companies being only 3.33%.
1.3. The demographic characteristics of the respondents
The analysis of the distribution by age and gender shows that more than half of the respondents are male, aged between 30-45 years. Regarding the experience and the functions held by the respondents, 43.3% have been working in the field of management consultancy for 10-15 years, and over 30% hold the position of manager/general manager, being followed by business owners (associates or shareholders).
Regarding the industries in which the clients' companies operate, 56.7% of the clients are part of the construction sector, followed by the commerce, IT, public administration, hotel and tourism sector, the automotive industry, the engineering of cars and machines, transport and logistics etc. It should be noted that the present study does not have the same characteristics of the respondents as the analysis carried out by AMCOR in the period 2018-2019, for example the construction sector with a share of 0% in both 2018 and 2019, while in the present study - the share of constructions is over 50%.
2. The current state of the sector from the perspective of digitization and virtualization of services
Regarding the current state of the management consulting market from the perspective of digital transformations, we have set out to analyze some aspects related to the level of digitization, the purposes of virtualization, the advantages of integrating the classic consulting models with the modern ones, using the technology-based methods and the level of customer acceptance towards them, as well as the billing models of digital consulting services.
2.1. The level of digitalization and virtualization of consulting services
It is noted that in the case of 17.02% of the respondents digital services support the close connection between internal employees, partners and consultants from "the field", 15.84% state that there are more and more projects in their own company - they work with the client, from distance, and over 14% use digital methods in most projects, and virtual consulting services are an imminent part of the model.
Using the analysis model of Nissen (2016) regarding the development of the consulting market from the analyzed perspective, it can be stated that the respondents are mainly distributed in the maturity levels of sector 1 (26.83%), 2 (28.61%) and 3 (28.25%), and only 16.31% of them are in the most developed stage.
According to the same author, level 1 of maturity is characterized by the use of technologies such as email, chat, video conferencing, Google Calendar, Doodle etc., in some projects. The services provided are performed, first and foremost, by traditional consultancy methods, in which staff works face-to-face with clients. Also, internal processes are mainly based on direct contact between consultants, internal employees and various partners, and virtualization is of minor importance. The maturity level 2 implies the existence of an increasing number of projects where consultants work with clients from different locations. The company makes efforts in virtualizing the internal processes and improving the networks between employees by implementing different technologies. The development of new technology-based consulting services is a strategic objective of consulting firms, but for the moment there is a medium importance given to virtualization and digitalization. At level 3, virtual consulting services are an integral part of the business model, with human resources, clients and partners being well connected digitally. Occasionally, completely automated services can be offered and virtualization is one of the strategic pillars of the company. The business model of the companies located at level 4 is mainly based on virtual consulting services, and consultants work with clients only in the highly critical phases and complex issues. Many of the services offered are fully automated, sometimes involving remote support. The company is so well connected with partners, customers and employees that problems can be identified early and services can be provided promptly and accurately.
This analysis showed that over 35% of the respondents follow the "core only consulting" approach, so they use virtualization for a more efficient and efficient exchange of information between the parties involved in projects, 25.32% have implemented interaction techniques organized with customers, while task automation and standalone client platforms are less used by responding firms.
These goals can be transposed into 4 approaches of management consulting (according to Werth and Greff, 2018), which characterize the development stage of the sector analyzed from the perspective of digital transformations, namely: core only consulting, platform consulting, self-service consulting and algorithmic consulting. The "core only consulting" approach involves the separation of the "physical" part (in which the personal interaction between client and consultant is necessary) and the one based on technology. Thus, through information and communication technologies (audio/video conferencing, programming through tools such as Doodle, Google Calendar or web portal billing), the consulting company is given the opportunity to provide efficient and scalable services. The platform consulting approach is characterized by outsourcing resources and obtaining economies of scale, this being achieved through interface platforms and interaction with clients and freelancers. The third dimension, "self-service consulting" involves the provision of digital consulting solutions, such as consulting applications/platforms or digital assessments of the autonomously realized problem to customers. The last approach, "algorithmic consulting" involves the automation of certain tasks such as the analysis and processing of large amounts of data, processes, presentations, etc., through techniques such as data mining or process mining.
This aspect seems to be slightly at odds with the development stages of the consultancy from the perspective analyzed, where most respondents were placed at levels 2 and 3 of maturity. This element suggests a lower level of virtualization and digitization of the services provided by the respondents than the levels previously stated, most being at the 1st and 2nd levels of maturity.
2.2. Modern management consulting methods and techniques
As the results of the previous subchapter reveal, management consulting companies are increasingly using technology-based tools, so most of the questioned companies use email, audio and video conferencing, chat as communication techniques, management systems of social media documents and tools, with low level of virtualization. There is, however, a rather high use of complex analytical tools (for example data mining) and crowd sourced consulting platforms that require a high level of virtualization.
From the perspective of integrating technology-based instruments into operational consultancy activities, there is a greater impact on qualitative indicators (market image, quality of results) than on quantitative ones (number of consultants, honored projects), so that 81.33% of survey respondents noted cost and duration reductions of projects, 79.33% said it contributes to the improvement of project results, over 71% have integrated the methods to improve the company's market image, observing, to a lesser extent the increase of number of honored projects, as well as the reduction of the number of consultants involved in the project.
Next, we analyzed the level of customer acceptance towards the tools used in consulting companies, the most accepted methods being those with a low degree of virtualization: audio and video conferences, chat, social-media tools, document management systems, and tools such as consulting applications, WEB-based coaching, data/process mining have a lower level of customer acceptance.
2.3. Billing models
Under the present conditions, of the use of digital technologies in consultancy, there is also the need to update the conventional invoicing models, especially in the case of approaches that are based on a high level of virtualization, in this respect, the fixed prices stabilized according to Individual packages or services are the most suitable (63.3%), followed by subscriptions (30%), price/use/license and price/use/demand (20%) etc.
3. Trends and future developments in the consulting sector
In the chapter entitled "Trends and future developments of the consulting sector" we set out to identify the issues concerning the importance of data security and confidentiality in the different stages of the consulting projects, the potential changes of the consultants' competences in the current dynamics, the relevance of the different types of transformations of business models and global market changes.
3.1. Digital trends challenges
Aspects of information security and confidentiality in the digital age are considered extremely important in all phases of consultancy projects, with the respondents showing clear approval, over 86% at all stages. In the phases of acquisition, problem solving and implementation of the solution, the importance is almost absolute - 91.33%.
In order to determine how much the digital technologies affect the classical consultancy, the study participants had to evaluate several statements (Figure 17). On average, most respondents (approximately 77%) consider that the adjustment of the "classic-digital" combination depends on the client and the project. The use of digital technologies in consultancy must first and foremost support traditional services (approximately 67%). Currently, a very small percentage (6.7%) of the participants predominantly offer the classic consultancy model and do not feel the need to integrate digital technologies into their daily work, while no respondents believe that the digital age will change so much the consulting sector that the classic models will no longer be used, being completely replaced in the future.
Asked to what extent they think the relevance of the consultants' skills will change with the use of digital technologies, the respondents considered that the affinity in the use of training technical skills, communication skills and rapid adaptation are considered to be the most important. On the other hand, programming expertise and mobility/desire to travel is considered to be less relevant than the other aspects, but still important. The elements of classical consultancy, the knowledge of foreign languages, the technical skills in the client industries and the teamwork will also undergo quite big changes, estimating an increase of their importance in the future.
3.2. New consulting business models
The digital transformations of the business model within the consulting sector can be divided into several types. Nissen (2018) differentiates 5 types of transformations for management consulting companies, distinguishing between evolutionary and disruptive ones, due to their innovative character. Digital evolution describes a step-by-step transformation process that affects the individual components of the business model. Digital disruption represents the complete replacement of classic consulting services with new digital approaches and technological innovations.
Generally, respondents have given high importance to all types of digital transformations of the business model. According to this, rethinking the consulting market is inevitable. The potential of technology-based solutions is recognized by participants, and their business models need to be critically reviewed. Comparatively, the forms of digital evolution are considered more relevant than those of digital disruption.
In addition, the current trends in the consulting sector were analyzed by consulting respondents' opinions on innovative approaches such as open communities or crowd sourced consulting. The results of the study show that outsourcing tasks to large professional communities and easy access to the market contribute to increased competition (90%), expert platforms and open communities have a positive impact on the exchange of knowledge and experience, and digital consulting creates a new customer segment, within which structure costs are more favorable, with an impact on competitive repositioning (86.67%). A lower percentage of the participants (73.33%) considered that there is a change in the market among the competitors, meaning that the companies that rely on technology in providing consulting services are assimilated to new competitors. Overall, the study shows that most of the respondents were in agreement with the existence on the Romanian market of the trends identified previously worldwide, obtaining scores over 70% on all aspects analyzed.
Our study revealed that from the perspective of the current trends of digitalization and virtualization of services, the responding companies have a high level of development, more than 50% of the respondents corresponding to levels 3 and 4 of maturity through the implementation and use of digital technologies in the operational activity, with no participant having to practice in a percentage of 100% the classic consultancy, this being a sign that the digital age has a strong impact on the sector analyzed by forcing the human resource to constantly adapt to changes in order to obtain advantages and, finally, to increase or maintain market competitiveness.
However, the pace of integration of digital technologies in the current activity depends very much on the level of customer acceptance, which is currently a good one, especially in the case of digital communication techniques (email, chat, audio and video conferencing), social media tools and in the case of document management systems, but relatively small for tools that require a higher degree of virtualization and digitization such as web-based coaching or data / process mining.
Regarding the current trends, the Romanian management consulting companies must take into account, during the development of the projects some key aspects that strongly influence them, such as data security and confidentiality (under the present conditions of the GDPR application and the increased risk to the cybernetics threats, changes in the structure and relevance of the skills and abilities needed by consultants, such as the increased degree of flexibility and adaptability to new situations and information, the use of technical tools, the ability to communicate. Moreover, digital evolution and disruption are causing major changes in the business models of consulting businesses. This should trigger the self-critical spirit of the owners and the management, so that the long-term development of the company does not have to suffer, especially in the context of the fierce competition due to the outsourcing of tasks to large communities of professionals, to the entry of some competitors that rely exclusively on technology and market niche by digital consulting firms.
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