By Andy Klose - Associate Partner
The consulting industry in the Middle East, particularly in the United Arab Emirates (UAE) and in the Kingdom of Saudi Arabia (KSA), has experienced a period of rapid growth post-COVID-19. However, recent economic shifts – especially budget cuts in Saudi Arabia’s public sector – have significantly affected management consulting companies operating in the region. While consulting companies in both the UAE and KSA continue to seek sustainable growth, they are facing challenges related to talent acquisition, retention, and compensation structures. This paper explores the key trends in the consulting industry, with a focus on their impact on the talent market and firm operations.
Saudi Arabia: The Epicentre of Consulting Demand
The Kingdom of Saudi Arabia remains the most significant market for consulting services in the region, particularly within its semi-public and government sectors. Many consulting companies have built their business models around serving Saudi clients, and the recent budget cuts have had a profound impact:
- Demand for consulting services has declined across various government projects.
- Most consulting companies have seen their growth slow down, with only a few maintaining the pace of previous years.
- Achieving ambitious revenue and profitability targets has become increasingly difficult for consulting companies.
Despite these challenges, Saudi Arabia remains a crucial market, and consulting companies are adjusting their strategies to adapt to the new landscape.
Increasing Sophistication of Clients and Changing Project Expectations
Clients in the region, from both the private and the public sector, are evolving in their approach to consulting services, which may have an impact on how consulting companies operate and compete:
Key Trends in Client Expectations
- Higher Sophistication: Clients demand deeper expertise and more tailored solutions from consulting companies (including more expertise with regards to the needs of SMEs).
- Longer Project Timelines: Consulting projects are taking longer to execute as clients scrutinize deliverables more closely.
- Shift Toward Smaller Firms: More clients in the region seem to be open to working with boutique consulting companies instead of relying solely on big brand names, creating additional competitive pressure from below.
- Implementation-Focused Consulting: Clients require more than just PowerPoint presentations; they need consulting companies with strong execution and operational expertise.
- Capability Building: Clients seek support in developing internal skills and knowledge instead of continuously outsourcing these capabilities to external consultants.
Implications for Consulting Firms
To succeed in this evolving environment, consulting companies should:
- Strengthen their ability to execute strategies beyond “pure” strategy or advisory work.
- Invest in training programs that help their clients develop in-house expertise.
- Offer practical, hands-on solutions rather than theoretical recommendations.
- Differentiate themselves through specialized expertise rather than relying solely on brand recognition.
Talent Market Pressures in the UAE
Unlike the KSA, the UAE consulting market is facing an overheating talent market with:
- Stagnant Compensation: Consulting salaries are said to have “maxed out”, making it difficult to keep increasing financial incentives as in the recent past. One consulting firm reported that a 5-8% pay increase for every promotion is no longer sustainable from a cost perspective.
- Employee benefits Under Review: As a result of these cost pressures, benefits were mentioned to be a “key differentiating factor” to be increasingly cost effective.
- Rising Cost of Living: The higher cost of living in Dubai and Abu Dhabi is putting pressure on consulting companies to increase allowances, which in turn is affecting profitability. In particular, the cost of accommodation was cited as a critical factor, with the rent for a two-bedroom apartment now as high as a villa with a garden would have been a few years ago. The cost of international schools has also risen significantly.
- Layoffs and Hiring Freezes: Some consulting companies have stopped and delayed hiring or even laid off staff to control costs and improve margins. It was mentioned that firms were more rigorous in their recent performance evaluations than in previous years, letting go of underperformers.
- Shift in Hiring Strategies: Also, some consulting companies are becoming more selective, hiring specialized talent for client or project-based needs rather than generalist consultants. Hiring for IT-related consulting services and subject matter expertise remains at high levels.
The result is a strategic shift in workforce allocation, with more firms opting to place or to hire consultants in the KSA instead of the UAE, where local talent is increasingly available. Also, it was said several times that consulting firms are focussing in the near term more on enhancing their benefits packages as the main differentiator in the talent market.
Evolving Workforce Strategies in Saudi Arabia
The Kingdom of Saudi Arabia has seen a notable improvement in the availability of junior consulting talent. Consulting companies that have invested in strong graduate and internship programs are benefiting from a steady pipeline of entry-level consultants. However, the mid-to-senior level talent pool remains highly competitive:
- Government Sector Competition: While there is no shortage of well-educated Saudi labour, many mid-to-senior-level consultants are being poached by government entities offering attractive compensation packages, leading to high attrition rates. Beyond better pay, many professionals are drawn to government roles for a better work-life balance.
- Localization Pressures: Saudi clients, particularly in the public sector, increasingly prioritize local hires and cultural alignment. This includes:
- Fluency in Arabic.
- Understanding of Saudi business customs.
- Strong local networks for business development.
To address these challenges, some consulting companies are taking innovative approaches to hiring senior-level talent:
- Hiring Senior Consulting Staff from Outside Consulting: Some firms are bringing in senior candidates from industry roles in the hope that they can provide valuable client connections. However, failure rates seem to be high, often due to a lack of sales acumen and consulting expertise.
- Increasing Local Presence: Consulting companies are pressured to have “troops on the ground” to compete for major government contracts. The Saudi government requires firms to demonstrate a local commitment, including adherence to Saudization quotas (40% of staff being Saudi nationals).
Compensation and Workforce Mobility Challenges
As consulting companies adapt to the evolving landscape, compensation strategies are also changing:
- High Costs for Senior Expats: The shortage of mid- to senior-level talent has forced consulting companies to rely on expatriates. However, relocating expats from the UAE to the KSA is expensive, as Saudi Arabia is still considered a “hardship location” from an expat's perspective. And it was said that hiring an expat to work in the KSA would cost 1.25 times more than hiring a Saudi national.
- Reduced Willingness to Relocate: Several international consulting companies noted that they receive many applications for relocation to the UAE from other countries. Once in the UAE, expats are also more inclined to stay, as one firm put it, “This is the highest paying region (in addition to no income tax and a comfortable lifestyle). Everybody wants to come and nobody wants to leave”.
- Dual Contracts for Expats: To mitigate costs, some consulting companies employ dual contract structures:
- A significant portion of the salary is paid in the UAE, where the consultant’s family resides.
- A smaller portion is paid in Saudi Arabia, where the consultant works for 3-4 days per week.
- Alternative Talent Pools: Some consulting companies have started flying in consulting staff from lower-cost countries from Egypt, Jordan, and Lebanon. However, this approach presents challenges such as:
- Visa and work permit complexities.
- Additional allowances required for travel and accommodation.
- Higher attrition rates due to (longer) travel chore and equality concerns.
The Future of Consulting in the Middle East
The Middle East consulting industry is undergoing a transformation driven by economic shifts, talent dynamics, and localization requirements. Consulting companies may adapt their strategies to remain competitive by:
- Investing in Local Talent Pipelines: Strengthening internship and graduate programs to develop homegrown consulting talent.
- Balancing Compensation and Cost Management: Rethinking expat pay structures and leveraging innovative mobility solutions like dual contracts.
- Enhancing Local Market Access: Hiring (senior) professionals with deep local connections while ensuring they have the necessary consulting skills and sales acumen.
- Optimizing Workforce Deployment: Using a mix of onshore, nearshore, and offshore talent to manage costs while maintaining service quality.
- Aligning with Client Expectations: Adapting to client demands for:
- More implementation-driven consulting.
- Stronger internal capability-building efforts.
- IT-related consulting services and subject matter expertise.
- Broader acceptance of smaller consulting firms as credible advisors.
- By proactively addressing these challenges, consulting firms can position themselves for sustained success in both the UAE and KSA markets.
We would be pleased to assist you with any additional inquiries or questions you may have.
Andy Klose is an Associate Partner at Vencon Research International and heads the firm’s consulting unit.
Vencon Research International is a leading provider of compensation benchmarking and research as well as of compensation and performance-related consulting services for professional service firms, especially for audit and tax, management consulting, and IT services firms. Vencon Research International provides services to a full range of clients in more than 75 countries worldwide and is proud to name more than 85% of the world’s major consulting and/or professional services firm its clients.