Saudi Arabia’s Message to Global Firms: Deliver Real Value or Step Aside

Moratorium on PwC business tells cautionary tale

My previous and current careers collided last week when the Kingdom of Saudi Arabia’s Public Investment Fund (PIF) announced a one-year moratorium on doing business with PwC (details continue to emerge even as I type this and the exact contours of the new Saudi PIF and PwC arrangement will likely shift, so I won’t try to evaluate a moving target). Having spent 13 years as a U.S. diplomat — including living in the Middle East for four years and taking at least a dozen trips to Saudi Arabia while working at the U.S. State Department, White House, and Department of the Treasury — I have some thoughts on how business and politics work in that region. I’ve also spent almost two decades trying to understand the Big Four firms, and I recently sat down in Washington, D.C., with some of PwC’s leadership to discuss the market, the firm’s ecosystem and what’s coming in 2025.
 
Bottom line upfront: Understand that this is a Saudi story, not a PwC story, although undoubtedly it doesn’t feel that way in PwC’s corridors right now. Saudi Arabia has an opportunity to send some critical messages to players in the country, in the region and globally, and the kingdom is taking advantage. If you’re among the many IT services companies and consultancies — and other multinational companies, although they’re less of a concern to me professionally right now — investing aggressively on growth in the Middle East and you’re misinterpreting this recent development as what PwC did wrong instead of listening to what the Saudis are trying to say, take a long pause and step forward only cautiously.
 

What are the Saudis saying?

First, the Saudis, through the PIF, have issued a warning — a shot across the bow — to management consultancies, IT services companies and others that have been enjoying a seemingly relentless flow of funds from the kingdom: Tighten up your accounts, sharpen your delivery, ensure your value proposition and the Saudis’ return on their investment in you will be abundantly clear. The McKinsey & Co., Boston Consulting Group and Deloitte partners may be enjoying some schadenfreude at the moment, but they understand the message coming from the Saudis: Bring tangible value, or don’t send us a bill.
 
Second, the Saudis have been feeling the positive heat of the world’s economic attention for a few years now, particularly as new leadership has pushed hard to invigorate the non-oil part of the kingdom’s economy. I wrote recently about what that has looked like in the United Arab Emirates — based on a webcast by PwC, coincidently — and for the Saudis, the initial success of those efforts and the increased global market and investor attention have been welcomed. What better time to send a message that Saudi Arabia has a transparent, high-functioning, rules-based economy, long since evolved from the souks of the old days and the opaqueness that characterized so much of the kingdom as late as the mid-2000s?
 
The Saudi Arabia and PwC story serves that purpose perfectly: We’re holding accountable a Big Four accounting and consulting firm and subjecting them to our high standards, just like every other advanced economy. The particulars of the kingdom’s regulatory environment and business culture can certainly be up for discussion, but the message, again, is clear: Everyone needs to play by the Saudis’ rules.
 
And maybe that’s the biggest takeaway as this story develops. Operating in the Middle East requires local knowledge, a regional presence, and an on-the-ground understanding that can only be sustained by being there. Yes, I am writing this 6,303 miles from Riyadh, but lessons learned hard are lessons long remembered, even over long distances. TBR has seen a surge in IT services companies’ and management consultancies’ investments in the Middle East and heard expectations around growth in the near term.
 
In my view, those investments and expectations are smart strategies and well founded. It’s the execution that matters, and a significant — perhaps the most significant — part of that execution comes from knowing the ground, reading the messages being sent, and understanding the story behind the story.