Information technology (IT) consulting businesses provide IT advice and implementation services to optimise clients’ operational processes and support business goals. We segmented the European market by service offering into (i) generalist, (ii) software & IT implementation and (iii) IT strategy.

The competitive landscape of IT consulting remains fragmented, consisting of (i) consulting giants and (ii) a long tail of more regional mid-market players and SMEs. The lower end of the market remains mostly untouched by large players due to the relatively low average fee level and profitability per project. However, the market is undergoing rapid consolidation, as large players seek growth via buy-and-build strategies, while their smaller peers may struggle with the continuous introduction of new technologies and increasing customer requirements and project complexity.

The sector attracts substantial interest from financial buyers, with ~50% of identified assets being sponsor-backed (October 2022). We believe that investors bet on players’ organic growth potential driven by secular digitalisation trends, combined with ample headroom to implement acquisitive build-up strategies. Nevertheless, the future growth of IT consultancies will remain constrained by scarce talent availability and disintermediation threats from large technology vendors.

IT consultancies play a key role in the decarbonisation of business IT systems, thereby creating an additional edge for ESG leaders. At the same time, talent shortages pose a major social issue for the industry, forcing businesses to rethink their recruitment and retention practices