Unit4 has published a new report created by Nick Mayes of Pierre Audoin Consultants (PAC). “Professional Services A Benchmark for 2023” looks at the current state of the professional services industry, its future, and its challenges.
After the initial post-pandemic optimism, professional services organisations have become more cautious about revenues in 2023. In 2023, 77% expect a rise in revenues, down by 6% in 2022. However, as optimism fades, 80% of PSOs are looking to improve organisational resilience. The evolution should help protect revenues and boost profits, with 66% expecting to experience moderate or strong profit growth.
Challenges hindering this include legacy applications (79%), integration challenges (76%) and the lack of a holistic view of business data (66%). Other challenges PSOs face are project management (45%), resource management (42%) and talent attrition.
The report is 24 pages and begins with a short introduction, the key findings from the report and the survey methodology. PAC questioned technology executives at 400 large and medium-sized PSOs from the US and Europe.
The bulk of the report is divided into X sections:
- The financial outlook of 2023
- Operational Performance
- Investment plans
- Innovation & Sustainability
The report finishes with a conclusion that includes recommendations that are not highlighted clearly as bullet points.
Each section includes an in-depth analysis of the data points from the survey, a few graphics to illustrate them and key takeaways. There appears to have been no qualitative element to the research, nor are there any quotes from customers or Unit4 executives.
Bryce Wolf, Senior Manager of Industry Solutions, Unit4, commented, “Despite the current market volatility, it is positive that the majority of PSO firms expect to see growth in 2023, but the industry continues to have a significant issue with legacy applications holding back innovation.
“Organizations must focus investment if they are to deliver new products and services and grow revenues with existing clients. The goal should be to increase organizational resilience, which will ensure firms have the agility to respond to market opportunities as they arise.”
The financial outlook of 2023
There is optimism for PSOs globally, though this varies by industry and nationality. US firms are most optimistic, with 42% expecting revenue growth of more than 5% in 2023, while 34% of Benelux firms expect declining revenues. The section draws on third-party data to paint a positive picture of the sector.
The authors also shed light on how PSOs will achieve that revenue increase with upselling and new product launches key to success. Mayes points out that increasing economic volatility makes this a sensible option. To achieve this, firms are looking to invest in tools to drive loyalty (65%) and improve retention (57%).
82% of firms expect to increase deal size. This brings additional challenges to cash management and increases the importance of robust resource and project management.
Operational Performance
This report looks at how PSOs have performed over the last year. Stunningly 45% of firms failed to deliver against at least a quarter of their projects. The survey did provide some insights into why this occurred:
- the challenge of harnessing emerging technology
- resourcing issues
- changing requirements
The DACH region was the most efficient, with 63% completing three-quarters of projects on time. The French were at the bottom of the league table, completing only 43%. Utilisation is recovering from the lows of the pandemic, with 42% hitting 80%, up 1% from last year. The reason, Mayes believes, is due to the use of spreadsheets within organisations, though spending on PSA solutions is set to increase at more than 10% in 2023.
Attrition is a big problem faced, with 36% of PSOs having more than 20% attrition. Talent management and retention strategies are more important. The report cites EY, which extended private medical healthcare coverage to its entire workforce in the UK.
Investment plans
Building on the previous section, this looks at the investments PSOs’ plan for in 2023 and beyond. The survey highlighted some regional differences. However, overall, firms see the potential for improving operational efficiency by investing in:
- Customer Services – 52%
- Project Management -50%
- Sales & Marketing – 48%
- Resource management – 48%
- Contract Management – 42%
- Finance and Accounting – 31%
Chief Financial Officers increasingly lead investment initiatives as their role evolves beyond their traditional function. Mayes stated, “60% of firms state that their CFO has a strong or leading involvement in contract and deal execution and sales and customer engagement while more than half (52%) also see them having a significant hand in recruitment and talent acquisition.”
Innovation & Sustainability
Legacy applications and integration challenges stymie innovation. Presumably, the two are linked though this was not drawn out in the research. There is also a desire to move towards data-centricity. However, 66% of firms feel they do not have the data where they want it when they want it.
Mayes also looks at the importance of sustainability within PSOs. Sustainability strategy has decreased in importance in Benelux (39%) and the UK (15%) but increased in DACH and the US (both 40%). This is perhaps surprising in Benelux, with Belgium introducing new legislation to promote sustainability for travel especially.
There is variance across the different sectors, with A&E (23%) and financial services firms (22%) believing ESG issues have increased in importance. However, management consulting firms are less positive. Where sustainability is important is where firms can see cost savings, such as energy usage. There is also a greater emphasis on tracking usage.
Enterprise Times: What does this mean
This comprehensive report needs a reasonable amount of time to read. The content is rich and contains a huge amount of information and analysis. It is well worth a read, though it feels more like an ebook with a few graphics than a presentation that is easy to consume. This is a positive thing as it means three are a lot of insights for the reader throughout the study.
For a rapid read, the key takeaways deliver some of the key insights from the report and, in themselves, are worth reading.
