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Estonian Consultancy Market Study - Summary of the Report Presentation 13 March 2015

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Estonian Consultancy Market Study - Summary of the Report Presentation 13 March 2015

Study commissioned by the EBRD (European Bank for Reconstruction and Development), delivered by Civitta Eesti AS team: Marko Rillo, Ander Ojandu & Mario Luik

Published in: Business
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Estonian Consultancy Market Study - Summary of the Report Presentation 13 March 2015

  1. 1. Estonian Consultancy Market Study for EBRD Civitta / 13.03.2015 Presenter: Marko Rillo Co-authors: Ander Ojandu & Mario Luik
  2. 2. 2 Data collection for the study • Quantitative research: • Survey of n=104 (114) respondents, included the PSFs in the following sectors (sent to 524 firms): • Accounting, advertising, architecture, auditing, construction service, engineering, export and import consulting, finance advisory, IT consulting, management and HR management consulting, marketing, patent consulting, productivity and quality consulting. • Desk research of annual reports of consulting firms and Estonian Statistical databases. • Qualitative research: • Focus group discussions and a number of face-to-face and phone interviews with larger public sector buyers and consulting & training service providers.
  3. 3. 3 Respondents overview (n=104) 0 2 4 6 8 10 12 1989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013 Year of Establishment of the Firm 0 5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 10 Client Base 0 5 10 15 20 25 30 35 1 2 3 4 5 6 7 8 9 10 Income Base 0 10 20 30 40 50 60 1 2 3 4 5 6 7 8 9 10 International Revenues 10 firms: 80% intl.
  4. 4. 4 Consultancy firms – key ratios and turnover 2011 2012 2013 Number of firms in operation among respondents 107 110 112 Total turnover of the firms (EUR) 72,096,824 69,736,318 69,565,389 Total number of employees employed by respondents 1,193 1,162 1,169 Averge turnover of firm 673,802 633,967 621,120 Median turnover of firm 148,000 153,814 200,000 Average turnover per employee 60,433 60,040 59,508 Estonian GDP Per capita (ppp) 9100 9500 9800 17 15 24 16 12 6 8 6 3 22 15 21 17 10 7 9 7 3 22 14 20 18 15 6 9 6 3 0 5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 Respondents' Annual Turnover 2011-13 Series1 Series2 Series3
  5. 5. 5 Size of firms and expansion plans 58 46 3 6 0 10 20 30 40 50 60 70 We do not need additional staff We need up to 2 additional consulting staff We need up to 4 additional consulting staff We need more than 4 additional consulting staff Expansion Plans 20 52 30 5 22 54 30 5 18 63 27 5 12 63 33 5 0 10 20 30 40 50 60 70 1 < 9 < 49 more at least 2 < 10 < 50 < Size of Firms - Number of Employees 2011 2012 2013 2014 projection
  6. 6. 6 Estonian consulting sector is cosy and stable Lifestyle consulting, many service a few clients / year • Majority (81/104) are micro firms - less than 9 employees. • More than half (58) do not plan to recruit! Only 9 firms plan employing 4 or more staff. Two of them already employ more than 50 consultants. • A fragmented history of M&A, some divestments: • 1999: Acquisition of EM International with EBS Group into EBS Juhtimiskoolitus; • 2008: Acquisition of Noman by BDA Consulting, partial divestment in 2012; • 2005: Acquisition of Businessgrain and Deloitte, full divestment in 2009; • 2014: Merger of Innopolis and Advisio into Civitta Eesti.
  7. 7. 7 Sectors –Estonian firms employ generalists 54 42 33 30 29 29 22 21 20 20 16 10 0 0 10 20 30 40 50 60 Manufacturing and services Other ICT Finance Municipal environment Property and tourism Legal reform Power and Energy Energy and resource efficiency Transport Agribusiness Natural resources Nuclear safety 21 36 11 17 12 5 3 8 0 5 10 15 20 25 30 35 40 1 2 3 4 5 6 7 8 Number of Sectors per Firm
  8. 8. 8 Functional specialization 55 40 35 31 28 28 24 23 18 17 16 16 16 16 11 4 0 10 20 30 40 50 60 Organization, general management and change management Human resource management EU structural funds Marketing Finance and investments Other Support to SMEs and SME finance Sales Information technology Engineering Accounting Corporate Governance Export and trade finance Legal Production International public sector 45 23 15 7 9 5 9 0 5 10 15 20 25 30 35 40 45 50 1 2 3 4 5 6 7 Number of Specializations per Firm
  9. 9. 9 Membership in professional organizations • Most are critical about professional organizations. • Positive notes about training and collaboration opportunities. • Seen as a potential vehicle for internationalization. • Most organizations do not fulfil this role up to their expectations. 5 29 17 6 How Useful is Your Professional Organization? Very beneficial Beneficial Not very beneficial Not beneficial at all 1 2 3 4 4 4 5 9 14 19 19 49 0 10 20 30 40 50 60 Association of Information Technology and… Accountants Union Marketing Communication Agencies Union Training Companies Union Board of Auditors Association of Quality Bar Association Association of Architectural and Consulting Engineering… Service Industry Association Consultants Association Others Not a member Membership in Professional Organizations
  10. 10. 10 Support of Enterprise Estonia and Chamber for Commerce and Industry 7% 42% 37% 14% Feedback to offered services and supportive activities Very beneficial Beneficial Not very beneficial Not beneficial at all Expectations: • More training programmes, and more appropriate service delivery • Networking activities, but not the old style "coffee and snacks", but more involved – e.g. facilitated discussions, workshops • Proactive role towards building the capacity of consulting firms and support to create consulting cluster • Careful about them trying to do the work of consultants
  11. 11. 11 Interest towards international work and countries • Top countries of interest: Finland (21), Sweden (12), Ukraine (12), Latvia (11), Germany (8), Lithuania (7), UK/England/GB, Norway, Byelorussia (6), Russia, Moldova, Georgia (5), Armenia, USA, Denmark (4). • Also: Belgium, Croatia, Serbia, Switzerland, Vietnam, India, Kazakhstan, Romania, Oman, Uganda, Hong Kong, Turkey, Italy, Poland, Bhutan, Indonesia, Dubai, Afghanistan. 31% 12% 12% 17% 28% Interest towards international work Private sector Public sector International organizations No preference Not interested 24% 32% 19% 8% 17% Interest working with development institutions Very high High Average Low Very low
  12. 12. 12 Interest towards international sectors Other: public sector reform, studies & analyses in social sciences, project management, biotechnology, graphic design, software design, communications, tourism, construction, services for start-ups 0 7 8 10 11 12 13 13 16 17 18 21 26 0 5 10 15 20 25 30 Nuclear safety Natural resources Agribusiness Legal reform Transport Energy and resource efficiency Municipal environment Power and Energy Other Finance Property and tourism ICT Manufacturing and services 7 42 49 52 65 86 0 20 40 60 80 100 Experience in development… Cheaper labour costs Strong references International network Specific know-how Qualified staff Self-Perceived Competitive Advantage Internationally
  13. 13. 13 16 respondents confirmed that they have previous experience of working with development institutions: 85 13 10 4 2 2 0 10 20 30 40 50 60 70 80 90 No experience EBRD World Bank EuropeAid Asian Development Bank European Investment Bank • 6 firms with active experience and 5, with first steps to start international development work. • There have been 3 companies, who have been very active (dozens of times in shortlists, winning bids) and 3 reasonably active
  14. 14. 14 Development of consulting skills, training approach and self-financing 64 52 40 28 22 35 40 28 0 20 40 60 80 On the job training Internal training in company Umbrella organizations Universities Other consultancies Local training providers Foreign training providers Project financiers Relying on Training Provided by 76% or more 11% 51-75% of cost 13% 26-50% of cost 31% 1-25% of cost 40% Nothing 5% What proportion of training cost would you bear yourself? Enterprise Estonia KAP
  15. 15. 15 Training topic interest 1 2 5 6 7 11 11 11 13 16 20 26 27 29 29 32 56 0 10 20 30 40 50 60 Gender Direct revenue-earning municipal services Project procurement for construction works Resource efficiency Training on FIDIC or equivalent Energy efficiency Environmental policies Monitoring and Evaluation Public procurement Corporate governance Institution building Information & communication technologies How to write a winning proposal Advanced project management EU structural funds training Training on opportunities of development institutions Business development
  16. 16. Final conclusions and recommendations
  17. 17. 17 Estonian consulting market in general • Estonian organisations are slow to engage consultants • Esp. companies of local owner-managers have do-it-yourself culture – consultants come after first trying and failing. • Larger organizations, public sector, companies with international management, new start-ups and younger generation have a more proactive track record of relying on consulting. • Comparatively – Latvia, Lithuania, Finland and Sweden use much more consulting service • Vicious circle – leads to lack of competition between consultants and no push to innovate and focus. Hence, prominent firms bring "real specialists" of "proper consultancies" from abroad
  18. 18. 18 Conclusions - Macro level in Estonia Estonia – findings • Estonian legal and procedural framework for doing business locally received high assessment. • Most tenders do not have minimum turnover requirements. Therefore, given previous experience, the entry barriers are virtually non-existent. • Estonian state eProcurement integrates the whole public sector into electronic bidding system providing one-stop full overview of all bids - procurement and appeals process work in a transparent and effective manner. Estonia – conclusions • One issue pointed out by some as a strength, by others as a weakness is lack of consultant certification mechanism, which makes it difficult to differentiate between poor and good consultants.
  19. 19. 19 Conclusions - Macro Level Internationally Development work - findings • Estonian firms have not shown interest in projects of a size above 200 000 EUR. • Regulatory or procedural constraints • Minimum turnover and headcount requirement. E.g. 50 employees and annual turnover beyond 5 MEUR. • Only 3 Estonian consulting firms meet 5MEUR 50 employee criteria alone. Development work – conclusions • The main solution for working internationally is to join the consortia and to combine the references either alone or preferably through an umbrella organization (such as Estonian Consultants Organization or alternative).
  20. 20. 20 Conclusions – Meso Level Estonian consultancy associations - findings • The consultants are expecting a number of services, e.g. for: • Professional development and training; • Networking and communication for peer interactions; • Creation of consortia for international bidding. • Consulting service clients are looking for a database of consultants or a first-stop shop to search for expertise. • Current organizations are considered inadequate for both. Estonian consultancy associations - conclusions • Professional organization's role to join the forces of individual Estonian consulting firms to bid together. • A central database of consulting providers and consulting marketplace might be useful. • If any one of the associations would be chosen as a counterpart for development work, they need capacity building support.
  21. 21. 21 Micro Level – International Work "International work? Yes, absolutely! But not me!" • Primary limitation for international work at individual level is the requirement for long-term full-time on-location service provision for experts in most international projects. • The most successful consultants in Estonia are family people in the age bracket of 35-45 years of age, who are not willing to take up long-term assignments in target country. • Therefore – if the international institutions are willing to relax their requirements for long-term in-country work, a number of highly qualified experts would be very interested in international tasks would increase substantially.
  22. 22. 22 Questioning: "(Stereo)typical Estonian Consulting Firm" • "My farm, my family, my tools, my way!" • 90% are careful and happy - do not want to grow nor expand • Learning by doing • The smaller the firm, the more specializations and sectors • Turnover per employee 60'000 EUR • Two clusters of firms: A) Projects of 500 – 3'000 EUR B) Projects of 2'500 – 20'000 EUR The max project size: 200'000 EUR
  23. 23. 23 Conclusions – Micro Level • A precursor – a specialized training programme for consultants, specifically targeting the topics of 1) development institutions, on 2) advanced project management and 3) on how to write winning proposals would increase the skills of consultants to work in international context. • International work requires complete rethinking of consulting business models. From lifestyle generalists to efficiently operating specialists!
  24. 24. 24 Report Commissioned by the EBRD and lead by Civitta Eesti AS team • Ander Ojandu ander.ojandu (at) civitta.com +372 521 3987 skype: anderojandu • Marko Rillo marko (at) markorillo.com +372 504 0260 skype: markorillo • Mario Luik mario.luik (at) civitta.com +372 55 598 316 skype: mario.luik

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