Consulting market in Russia

Market overview and dynamics

One of the main steps of literature review is analysis of current situation on consulting services market of Russia. This needs to be done for the following reasons. First, in order to understand what different areas of consulting services exist on Russian market. Second, to know if there are new market challenges or issues currently take place on the market.

According to Russia’s largest rating agency RAEX (n.d.), the overall consulting market of Russia shows that situation is bleak: market stagnates and even starts to shrink. Moreover, revenue growth of the biggest consulting groups in 2014 is 9% and the overall volume of consulting services valued Ƥ116.4 bln. Revenue growth rate is lower than in 2013 (+14%), and even lower than inflation rate (11.4%).

Taking into account current economic situation and market dynamics, it is possible to define two controversial factors that influence consulting market:

1. In general, companies cut their budgets for consulting and strive to cost savings, because consulting and marketing activities are the first that being reduced during the crisis

2. Companies need consulting services typical for the crisis periods, such as financial consulting (Khanferyan, 2015).

Therefore, several areas of consulting, typical for the crisis periods will be required among companies: according to RAEX (2015), there are tax consulting, legal advice (especially regarding bankruptcies) and assistance in fund raising.

Moreover, the majority of consulting companies CEO`s stated that during crisis there are almost no significant projects, only maintenance processes or small tasks (Rushaylo, 2015). The biggest clients are government and governmental structures (Khanferyan, 2015). Companies are the smallest group of clients and their projects are relatively small and boil down to cost optimization.

Consulting companies’ representatives agree on the following problems taking place in the market (Rushaylo, 2015):

· Budget (for consulting) reduce affected the average cost of services, therefore in order not to lose clients consulting companies try to decrease prices that engender price competition

· In poor financial conditions, many clients reject some project phases, delay payments, so the risks of projects are unevenly distributed

· The budgets for consulting, as well as on other projects significantly reduced, but the volume of work remains the same; Consulting companies cope with cost optimization as the main type of project both within clients and within the company

· Due to cost optimization “popularity” among projects, consulting companies expect these type of tasks to be in demand for a couple of years

Market structure

Russian consulting market consists on different areas. According to RAEX (n.d.), in 2014 consulting market was divided between areas (based on overall revenue) as follows. The pie chart indicates the revenue structure among consulting areas of the majority of consulting companies, operating in Russia (RAEX agency, n.d.).

Fig.1 Revenue (RUB) structure (areas of consulting) of consulting companies in Russia, 2014, %

So, it is clear that IT – consulting, financial consulting, audit, tax& legal consulting have the huge share in overall consulting market. Talking about development of areas, financial consulting indicated 30% growth rate. According to Svetlana Romanova, CEO of Nexia Pacioli Consulting (Khanferyan, 2015), one of the reason of such growth is popularity of due diligence - the procedure for obtaining objective information about the legal person, including the work of auditors, appraisers, lawyers and consultants, and activities associated with the production of the customer's system of "lean production". The interest to carry out due diligence related to the fact that in times of economic equilibrium disorders occur more frequently procedures change of ownership of economic entities.

As for the growth rate for other consulting areas of Russian market, the following chart represents the dynamics for 2014 (RAEX). Financial and legal consulting showed the highest growth rate, so it simply can be explained by unpleasant conditions of market and companies need to optimize and improve their expenditures, costs, operations, deals.

Fig. 2. Consulting companies revenue growth rates, 2014, %

IT - consulting

As our project is more related to IT – consulting, we present the Russian IT consulting market features and its main players.

It was already mentioned, that IT area of consulting that includes system integration and management consulting on IT is the biggest in Russia in terms of revenue: Ƥ56.7 bln, which is 55.1% from the whole market revenue (Khanferyan, 2015).

As for the types of projects in IT consulting, many CEO`s stated that clients now are really careful, they do not provide them with big, breakthrough projects, especially in commercial and non – governmental sector (Rushaylo, 2015). Clients very carefully treat spending, even in projects to improve their own efficiency. The main reason - the uncertainty of the economic situation. No one can understand what will happen tomorrow, so many factors that affect it: both political and economic. If we talk about the commercial sector, in which IT – consulting companies mainly operate, this is reflected primarily on cost control policy. IT is that area which undergoes conservation in the first place (Khanferyan, 2015).

On the other hand, according to Andrey Yakimenko, executive director of BDO Unicon, there is a change in focus of clients from major implementation projects or the development of systems to individual functional solutions such as supply chain management, budget management and analytics, the system of internal control and risk management, competitive procurement,etc (Rushaylo, 2015).

However, the main focus today is the rapidly growing interest in building an effective system of IT management of the company as an asset, aimed at obtaining competitive advantage and increase operational and economic efficiency of the business. In fact, there is a transition from the stage of quantitative and functional computerization coverage to improve the quality and effect of the use of IT solutions. That is why there is a special interest in the concept of IT Governance as a technology of management of IT resources and data as a company`s asset involved in its economic growth and efficiency (Rushaylo, 2015).

To sum up trends in IT – consulting:

· Cutting companies` consulting budgets AND volume of work remains the same=> 2 sided costs optimization (companies and clients)

· Few big projects, but a lot of small tasks and maintenance

· The revenues (in RUB) in this sector were growing before 2015, ~ 8-9%, but lower that current inflation rate for 2014, 11.4% [30], => market is shrinking

· Sanctions and import substitution influence IT consulting – some companies try to substitute western software, some companies try to upgrade current IT, because only the few share of required IT is Russian, therefore it is better for companies to upgrade the current IT by foreign vendors (Rushaylo, 2015).

One small, but important observation is that many CEO`s of consulting companies were talking about absence of significant projects in negative way (Khanferyan, 2015). It means that for consulting companies it is bad condition, because they have just small tasks and forming teams, organizing work and receiving smaller amount of money for small tasks is not the priority for them. According to this, we see there a gap, connected with cloud consulting (small tasks can be divided between specially organized community of individual experts from different industries, with different knowledge working together on some specific issue or task). Therefore, it can be sufficient to develop such an approach to consulting.

Players in IT – consulting market

According to 2015 IDC`s Competitive Profiles and Analysis of Leading IT Services (Agapov & Prokhorov, 2015). Players in Russia, it is clear that Local providers dominate completely the Russian IT services market, accounting for around 90%. Only 25 out of the top 100 providers are international companies.

Major domestic Russian IT consulting companies are LANIT, I-TECO, Compulink, Kaspersky, and Yandex. Due to nondisclosure agreements of Russian companies, sometimes it is hard to obtain the information from them. Some information can be found in IDC `s report. Major multinational players on Russian IT market are IBM, Microsoft, and Google.

According to it, and also RAEX rating of top IT consulting companies, it is clear that all top companies are local market players.

Strategy

Date: 2015-12-18; view: 978