Accounting firms’ consulting revenue surpasses $25B
The consulting revenue of U.S. accounting firms is continuing to grow, increasing 9 percent to $25.7 billion in 2018, according to a new report.
The report, from Source Global Research, wasn’t all good news for accounting firms, though. For the first time in five years, it found that U.S. accounting firms dropped to third place behind technology and strategy firms in terms of their growth rate last year, with tech-focused firms growing 10.6 percent to$15.7 billion and strategy firms increasing 9.8 percent to $12.7 billion.
The tech firms saw strong client interest in new technology, such as data analytics, along with upgrades to their legacy technology systems. The strategy-oriented firms, for their part, benefited from a surge in M&A activity, along with assignments in reshaping the customer interface and developing strategies around new technology.
“Despite increasing competition, U.S. accounting firms have once again proved their attraction to clients, not only for their brand presence but also for their ability to offer end-to-end support and their strength in huge and fast-growing areas, such as financial services,” said B.J. Richards, senior editor at Source Global Research, in a statement. “But continued strong growth rates come with a hefty price tag. The achievement of these great results is a direct consequence of the commitment — at least on the part of the Big Four, which remain the very largest players in this group — to constantly upgrade what’s on offer to clients.”
There are some exceptions to the growth spurt for firms. “We're having an incredible year in financial services, with one major exception,” said Hank Prybylski, Americas vice chair of advisory services at Ernst & Young, in a statement. “Asset management is doing well, as is insurance, but retail and wholesale banking is slow. Ten years after the financial crisis, the slowdown in regulatory reform is having an impact on the latter market.”
The competition is prompting many firms to look for expertise from many different outlets. Pressure to offer clients every conceivable expertise and skill set is forcing firms, including the Big Four, to look for resources beyond their own four walls. They are building partnerships with smaller firms and so-called “ecosystems” to provide a more cost-effective and agile alternative to acquisition. Smaller firms can benefit from the ability to access larger clients and projects without being absorbed into a behemoth firm.
“Clients want us to bring an integrated platform to the table. Traditionally, many projects have involved us working with one of the large software companies, but it's now more typical for us also to be working with half a dozen specialist players, which means that having an ecosystem of potential partners is becoming increasingly important,” said Tom Puthiyamadam, U.S. management consulting Leader and global digital services leader at PwC.
Ongoing investment in cutting-edge approaches to complement existing strengths is likely to lead to continued solid growth in revenues for U.S. accounting firms, according to the report. The ability to offer services across the consulting field will also enable this group of firms to hedge against the possibility of demand for certain services falling away, which will continue to place these firms in a position to increase their market share for some time to come. As a result, Source Global Research is estimating that U.S. accounting firms will grow their revenues 10 percent this year.