This article from the Australian Financial Review shows a changing market in Australia.
AFR dated 18 April 2017.
In the world of accountants, lawyers and consultants it’s suddenly become a client’s market.
Better access to information, a steady flow of professional-services escapees starting up their own businesses and new rivals such as Internal Consulting Group and Expert360 (so-called platform companies) means clients know what they want, they want more and they know all the tricks.
In short, it’s the clients who are in charge of the professionals. And there’s one important consequence.
“It’s increasingly a buyer’s market, where competitive panel arrangements, equal access to information and growing sophistication among clients is driving down the price of professional services,” said Paul Rubenstein, managing partner of the Sydney office of law firm Arnold Bloch Leibler.
Paul Rubenstein, the managing partner of the Sydney office of law firm Arnold Bloch Leibler: the relationship is the key factor to keeping clients and ensuring they don’t turn to lower-cost providers. Jessica Hromas
And just to add to competitive pressure the accounting and legal services industry is growing at less than the rate of GDP.
The local legal services industry is under the most pressure with growth tipped to be 1.4. per cent a year between 2017 and 2022, according to IBISWorld estimates. The researchers estimate that demand for accounting services will grow at 1.8 per cent a year in the same timeframe.
All this as the rest of the economy is ticking along at a comfortable 2.4 per cent.
The management consulting sector is doing a bit better in the growth stakes but that’s partly due to the seismic impact of the big four accounting firms.
Feeling the pressure
Diana Chang, the Sydney office managing partner of law firm Clifford Chance: “We provide hubs of up-to-date information where our clients can log on to pick up the most current and comprehensive insights.” Supplied
One way or another accountants, lawyers and consultants are all feeling the pressure, and their response has been to take a bite of each other’s lunch.
Law firms like Minter Ellison are moving into non-law consulting work, strategy firms like BCG, Bain and McKinsey are now helping clients carry out their grand plans and the big four – Deloitte, EY, KPMG and PwC – are in everything now, from law through to strategy and consulting work and even advertising.
All the firms are scrambling to play catch-up in the technology space, often by simply buying out smaller firms in the latest hot area, setting up digital divisions or by trying to emulate the high-tech firms that have so captured the public’s imagination.
One outcome has been the big four accounting and advisory firms have managed to post double-digit growth in the 2016 financial year, despite the flat market, as they continue their expansion into ever more diverse services.
Meanwhile, the entire professional services sector is splitting its activity in two, says Fiona Czerniawska of the UK-based research firm Source Global Research.
There’s the the high-end work that brings prestige and the big dollars, and then there’s the grunt work that clients see as a commodity to be automated or be doled out to the lowest cost operators or performed in-house,
“There’s still demand for highly experienced consultants and lawyers who are capable of innovative thinking and expert problem solving, but that part of the market is quite different to the more run-of-the mill, semi-industrialised work typically done by more junior people,” she said.
“Clients are increasingly saying that these two markets are distinct, requiring different skills and involving different price points. They are, in effect, different business models.”
There are other subtle changes. Increasingly the firms are finding themselves training clients to do their work for them, in effect doing themselves out of future work for the sake of the relationship.
“We recently spent two days helping our client interview for three leadership roles that replaced the consulting roles we held,” said Ian Hancock, the lead partner of KPMG’s management consulting group.
“In another case, we trained our client project team with the latest project and change-management techniques to improve the likelihood of project success and in doing so reduce the reliance on us.”
Professional services firms may be adjusting to the demands of an IT literate industry but age-long habits die hard.
“Old school is often good. I’ll be talking to some clients and afterwards I’ll write a thank-you note,” Ian Hancock says. It might sound obvious to some people but in the IT-literate crowd pen, paper and stamps are something for the museum.
He may be on to something – all we’ve been hearing for decades is “it’s the relationship” that matters. What Mr Hancock and his cohort observe is that the human connection is still key.
“Before, you could get away with a really deep understanding of a technical area. And that could potentially forgive the sins of not being personal, not being consultative. That has changed,” he said.
“There are now far fewer website queries than we’ve had in the past. The brand opens doors and then they want to meet the individual. If you don’t have [people skills], people will say ‘I don’t want to work with you’.”
KPMG’s approach has seen it rewarded in this year’s Client Choice awards where the firm won for best large accounting firm and was a finalist for best management consulting firm.
The firms are also giving clients continual access to knowledge and services via online tools as a way of staying connected.
Range of tools
Diana Chang, the Sydney office managing partner of law firm Clifford Chance, highlighted a range of tools made available to clients on-demand.
“We invest heavily in our client portals online – we provide hubs of up-to-date information where our clients can log on to pick up the most current and comprehensive insights with regard to key issues influencing their businesses. On our website, for example, we offer up a Global M&A Toolkit, a Financial Markets Toolkit, Talking Tech, a technology portal and a Brexit Hub,” Ms Chang said.
A recent survey of more than 10,000 clients by Beaton Research + Consulting found the perceived value of consulting services had risen for clients of accounting, engineering, consulting and legal firms, while the perception of fee levels was steady or falling.
For Arnold Bloch Leibler’s Mr Rubenstein, the relationship is the key factor to keeping clients and ensuring they don’t turn to lower-cost providers.
“Last year, two clients I act for separately had a disagreement in relation to a deal they had both invested in,” Mr Rubenstein said.
“Given the history and relationship I have with each of them, they approached me and asked me to mediate. It was complicated and took a fair bit of time and energy but I managed to help them reach agreement.
“This is not something I charged for. It is simply something I was happy to do for people who have independently supported us over a long period and with whom we have a deep relationship.”
The relationship should be at the point where when the client is in trouble and “when it really counts, you are the person they know they can turn to and rely on”.
Read more: http://www.afr.com/business/accounting/professional-services-is-now-two-very-different-markets-20170315-guylb5?&utm_source=social&utm_medium=facebook&utm_campaign=nc&eid=socialn:fac-14omn0053-optim-nnn:nonpaid-25/06/2014-social_traffic-all-organicpost-nnn-afr-o&campaign_code=nocode&promote_channel=social_facebook#ixzz4eghMtikS