COVID-19 catches manufacturing and retail verticals flat-footed, limiting IT and service investment

While manufacturing and retail companies are capitalizing on some opportunities during the COVID-19 pandemic, they are also experiencing significant negative short-term impacts. Making matters worse, most companies in these verticals lack the agility and IT infrastructure necessary to adjust in the current environment. The result will be a severe slowdown in these sectors, which will delay or halt many IT projects and service engagements that could have long-term business value.

Service opportunities will take a hit due to the downturn in manufacturing and retail verticals

Early assessments predict the manufacturing and retail industries will be among the hardest hit by the economic fallout of COVID-19, for reasons related to supply chain disruption, government-mandated store closures, and inefficient operations for factories using a mostly remote workforce. TBR’s Management Consulting Benchmark includes industry revenue splits for the 13 covered companies, providing a view into which consultancies could be most exposed to clients’ economic struggles. Consulting, by its nature, loves chaos and uncertainty, but the clients themselves may struggle financially and delay or outright cancel plans to extend or transform their digital and IT environments. We cannot predict whether clients will need more or less from these consultancies, but we can understand their exposure. At the highest end, PwC and BearingPoint earned more than 27% of their management consulting revenues in 2019 from those two industries, with Europe-based BearingPoint the highest in the benchmark at 28%, in TBR estimates. At the lower end, Accenture (NYSE: ACN) was the only consultancy that saw revenues from those two industries at less than 10% of its 2019 total revenue (just under 9%), while EY came in at 15%. The remaining firms ranged from 22% to 26%, considerable exposure for two of only nine industries tracked in the benchmark. We can state with confidence that the consultancies that deployed automation internally, implemented asset-light strategies, and invested in remote delivery and robust remote employee structures will fare better than peers. From an organizational perspective, we will also likely see consultancies that have 20-plus distinct industry “specializations” consolidate into broader and more diverse verticals, spreading out the risk of any one practice suffering from another pandemic-like economic crash.

Register to view this content in full.

Register Login

Leave a Comment

Your email address will not be published. Required fields are marked *