In the last few years, nearly every industry has undergone disruption. Professional services organizations (PSOs) have not only been impacted internally by the Great Resignation, hybrid working, and now inflation, but also externally by the impact of those trends on the businesses they serve.
This blog will look at the major trends emerging in the wake of this disruption for the professional services industry. Based on some recent conversations with industry leaders, we will identify the trends affecting businesses of every size, what those trends can mean for your business, and steps to mitigate negative impacts.
Talent Shortage
The last several years have seen consultants leave firms attracted by higher salaries, flexible working, and a better work-life balance. It’s not just talent being pulled away to other firms by more competitive offers either – some parents left the industry entirely to concentrate on childcare. And in new research from Kantata, 76% of surveyed independent contractors indicated that they had been full-time employees only one year ago. Many people with the skills professional services businesses need to be successful are now operating out of the contractor workforce.
This is making the day-to-day realities of managing a services business more difficult, as Kantata’s research shows that 61% of business leaders spend at least a third of their time each day solving employee turnover issues, and 53% of business leaders say they are having a problem hiring full-time employees.
So how do you retain and grow your talent pool when market forces are working against those efforts? Jacqueline Stanley, Director of Delivery at Hero Digital, summarized the situation for many saying, “When you can’t necessarily jump everyone’s salary very quickly, you have to look at your internal culture and your management. You need to make sure that people are happy and don’t want to take a chance of just leaving for more dollars.”
Organizations now have to consider the wellbeing of workers, introduce hybrid working, and reconsider their staffing strategy.
Sarah Edwards, Chief Product Officer at Kantata, said, “We’re seeing an increasing trend around health and wellbeing of our staff, and being able to make sure that we retain and develop our talent. It’s really important that you start to think about that early on. How do you make sure that not only consultants feel engaged, but they have the tools and the processes to manage their career, health, and wellbeing?”
Consultants, especially millennial and Gen Z workers, want more choice about how they work, when they work, and even on what projects they work on. There is also growing pressure for organizations to embrace DEIB (Diversity, Equity, Inclusion, and Belonging).
Firms must invest in systems to enable and support the processes to overcome these challenges. While professional services tools do not solve all of these challenges, they can support initiatives that do. For example, resource management tools can check for current and future risk of burnout, let consultants request involvement in future projects that align with their aspirations and goals, and support flexible and asynchronous working.
Evolving Business Models
Pre-pandemic, value based models were all the rage. While the idea has not completely disappeared, many companies are setting it aside. There are still changes. Clients are seeking shorter engagements and as industries come under pressure, it is often harder to forecast demand. Edwards has seen that in her role working with Kantata clients, “The speed of services continues to increase, a higher volume of perhaps smaller engagements.” Customers expect faster staffing and faster delivery alongside higher expectations.
There is also greater volatility in some sectors, with marketing agencies experiencing this at a notably high rate because of a greater ebb and flow of business and more delays to delivery due to conscious client decisions and illnesses than ever before.
To counteract this volatility, PSOs are trying to change the narrative by introducing subscription or annuity-based models that bring in regular income from clients with the benefit of smoother cash flows.
Hybrid Working
The pandemic proved that remote working does work for PSOs. However, while many smaller companies have ended leases, some larger companies are moving back to the office, sometimes three days a week. Why? Is it the top down hierarchy prevalent in these larger firms or perhaps an understanding of the need to build personal connections across the organization?
Uriah Hakala, VP of Global Advisory Services at Kantata, notes, “In any sort of services business, your job is based on your rapport with your colleagues and customers. Without being able to do any of that face to face stuff, there has definitely been an itch to go back, to some sort of in-person, get-togethers, whether it’s in the office or something else.”
Business is in a period of rapid evolution, virtual consulting is here to stay, but even the early adopters of remote working frequently have staff get-togethers to build relationships. In time, a new, more settled way of working will evolve. Until that happens, business leaders need an awareness of how they can support the demands for flexible, office, and remote working whilst delivering to clients.
KPIs Are Changing
Businesses use key performance indicators (KPIs) to tell them not just how their business is doing, but also how it is going to do. While KPIs are an invaluable tool, business leaders can only track so many KPIs. So which are the valued KPIs services leaders are using to run their businesses?
Hakala points out that the metrics leaders keep close at hand are changing as the cost of living crisis starts to impact business. He notes the “change in metrics from the growth metrics of revenue gains and utilization – that has stopped for some companies. It has shifted to cost focus, margin focus, and making better use of what we have, or a shift to lower cost resources.”
Some PSOs are maintaining growth metrics, but for others there is a greater focus on costs. This is where access to real-time data is critical. Firms no longer want to project a year out, they need visibility to react in a far shorter timescale with a focus on how to stay in business. Hakala concluded stating, “There’s definitely been a shift in the kind of mindset of the way they’re looking at their services business.”
Consolidation and Globalization
While consolidation has long been a factor in the lifecycle of PSOs, a new trend is emerging. Firms that have grown through acquisition, and some larger organizations are considering internal consolidation more carefully. The move to remote working has meant that staffing projects with resources from other business units can be very cost effective. A move to technology that supports global workforce visibility and intercompany accounting is supporting this organizational and cultural shift.
Remote work has also had an impact on outsourcing. In the US, there is a shift toward finding talent in Central and South American countries, such as Argentina, Costa Rica, and Mexico. These organizations have already shifted away from outsourcing to India because of price and time zone and Eastern Europe because of disruption. Central America and South America are attractive for cost reasons and because of the similar time zones.
This globalization is also reflected in customer demand as multi-national organizations want to deploy a single cloud solution worldwide. There are therefore more opportunities for global professional services organizations who can help these MNOs, such as consulting networks or the larger Global System Integrators.
Move Away From Spreadsheets
While organizations have invested in CRM for their front office, as well as finance and HR systems for their back office, the bridge that joins the two is often missing or incomplete. Many PSOs leverage spreadsheets to fill the gaps and ensure teams across their organization have the information they need to adapt to evolving trends. The issue: spreadsheets are often error-strewn, rarely scale, and are often stepping stones between systems, introducing even more gaps because they are connected using manual, time-intensive processes .
What professional services organizations need – and what an increasing number of professional services organizations are gravitating towards – are modern professional services-centric applications, built and supported by professional services experts. A recent Forrester study commissioned by Kantata, “Vertical SaaS For Professional Services Is Driving Material Benefits,” found that 73% of professional services business leaders who weren’t yet using a vertically oriented solution said their organization would greatly benefit from vertical SaaS that has out-of-the-box, configurable capabilities that align with their essential use cases.
Is the technology you’re using to support professional services able to forecast revenue, margins, and resource needs accurately without time-consuming manual intervention? Are your systems cloud-based, collaborative, and able to support virtual consulting? If not, you may find your business behind the curve in an industry that is increasingly embracing specialised, industry-specific solutions.
The Rise of AI
The use of AI within PSOs is an emerging trend. Modern professional services tools are beginning to take advantage of AI capabilities to enhance forecasting and resource allocation. These are not the only use cases, with solutions using AI to surface insights regarding the next best action a user should take, and detect anomalies in data.
Chris Mitchell, VP of Global Accounts at Kantata, points out, “The big consulting companies are selling AI [as important],so it would look a bit odd if they’re not using AI themselves. I think the concept of AI layering over your existing systems, and complementing and enabling decision making is actually very seductive. Resource management is one area where I’ve seen AI being applied.”
AI and ML is applicable across the professional services technology stack. Professional services organizations must look for professional services tools that have embedded AI features within the solution and a roadmap for extending their use cases. AI features deliver automation and intelligence that will deliver competitive advantage and can no longer be considered a “nice to have” feature, as they are becoming the norm.
Does Your Tool Measure the Pulse of Your Professional Services Organization
These trends have a massive impact on the performance of any professional services business. Ignore them at your peril. Remember, just because you cannot detect the trends occurring doesn’t mean they aren’t. It may be time for you to move from a spreadsheet based organization to one that is using the latest professional services tool delivered by an vendor that is immersed in the industry.
It’s crucial to be able to detect where your business performance might be in trouble. The right professional services tool can achieve that. Kantata’s new whitepaper, “How To Tell If Your Professional Services Organization Is Flagging” is designed to help you easily bring these issues to light. Get your copy today.
Kantata takes professional services technology to a new level, giving people-powered businesses the clarity, control, and confidence they need to optimize resource planning and elevate operational performance. Kantata’s purpose-built software is helping over 2,500 professional services organizations of all shapes and sizes in more than 100 countries to focus and optimize their most important asset: their people. By leveraging the Kantata Cloud for Professional Services™, professionals gain access to the information and tools they need to win more business, ensure the right people are always available at the right time, and delight clients with project delivery and outcomes.
