Deltek has published the 46th Annual Clarity Architecture and Engineering Study (registration required). The report, which is based on a survey of industry leaders from across the US and Canada, is the third Clarity report that Deltek has published this year. The first was its European Clarity report for the same sector, last month. Earlier this week it published its 16th Annual GovCon Clarity report.
The 119-page report is a comprehensive study of the industry. The report provides the reader with a detailed analysis of the survey across five sections: Technology, Business Development, Project Management, Human Capital Management and Financial Management. Each section examines the trends and challenges. The report leverages secondary research, brings in comments from industry leaders and data visualisations.
The report concludes with some quantitative statistics from the survey and separates out firms by size, whether architecture or engineering and high performers, compared to the average. The report is probably the most comprehensive in the industry and can leverage historical data to provide solid trend analysis, including ten-year trends.
Megan Miller, Director of Product Marketing at Deltek summarised the findings as follows, “Firms are cautiously optimistic with strong profitability numbers while facing ongoing labor pressures and economic challenges.
“We’re seeing firms make more disciplined decisions – being more strategic in their project pursuits, investing in AI, and focusing on operational excellence to drive lasting results. It’s promising to see the industry’s progress in digital transformation, as more firms are adopting new technologies and maximizing their current tech investment to create a more automated and integrated tech stack.
“As firms look ahead, continued investment in upskilling teams, increasing visibility into their projects, and leveraging the full value of their technology stack will be essential for their sustained growth and resilience.”
Technology Trends
There are some obvious findings within this section. Firms are increasingly using AI and Machine learning, with usage up 15% from 2024 to 53%. Cybersecurity remains the top concern, 28%. However, the rapid evolving technology landscape is also a challenge, with 67% struggling to determine where and how to apply technology and 44% facing challenges deploying new software.
The report did not investigate why these are challenges though, or identify best practices to overcome them.
To address these challenges, firms are creating new security policies and procedures and re-engineering business processes. Perhaps next year, the report might go into further detail about these. Cloud continues to roll out across A&E firms as legacy platforms are removed. Only 20% of firms remain in the early stage of adoption, down 3% from last year.
One interesting section is the reliability on manual data entry. No trend analysis is given, and it would have been useful to compare against the company adoption of AI. Perhaps surprisingly, only 5% of Accounting and Finance were not at all reliant on manual data entry, the lowest.
Business Development
Profitability achieved its highest level for 10 years, at 21.4%, with net revenue per employee rising 11% year-over-year. High-performing firms achieved 31% in profitability. Firms remain optimistic for growth, with a forecast of 9.6% net revenue growth. The survey indicates that firms may be getting smarter about what they pitch for with proposals declining by 38%, but the value rising 52% and win rate edging up to 50%.
The top three challenges were finding time to nurture client relationships (57%), increased competition (49%) and identifying new prospects (36%). The study also looks at the existence of formal business development processes, with Larger firms more likely to have them.
Oddly, high performing firms (42%) were less likely to have them than other firms (48%). Despite this, the authors wrote, “having a defined BD process is more than a best practice, it’s becoming a competitive differentiator.”
Project Management
The challenges faced by A&E firms remain familiar with the top three being:
- Competing priorities (e.g. PM, design, BD) – 64%
- Staff Shortages – 43%
- Inexperienced Project Managers – 36%
The report also looks at the challenges for construction, managing project information and documenting site visits. All challenges that Deltek technology can address. Efficiency is improving, after the drop during COVID, to 62% of projects being completed on or under budget; that figure has risen steadily to 75%, the highest since 2017, and the second highest in ten years.
While the report flags project visibility, metrics, it does not show trends in this area. Though it noted that schedule reports have increased in accuracy since last year. What is disturbing is the trend in client satisfaction measurement, with 5.1% fewer firms measuring client satisfaction from the previous year.
With the growing importance of customer success and client satisfaction being a key metric, this may explain why nurturing client relationships is a top challenge. It is an area where the report could provide useful actions of questions for business leaders to query how their firm operates in this area.
The section closes with the top project management initiatives, 43% (the highest) are investing in internal PM training. Formal PMP certification ranks very low, with only 2% investing in it. It would be useful to know why. Especially as firms need to attract and retain staff. Should they invest in formal certification initiatives for staff?
Human Capital Management
There has been slower growth in staff over the last year, 2.9%. Attracting talent remains the biggest challenge with respondents. Firms are also struggling to deliver competitive compensation, with firms shifting to other benefits such as employee training and development (65%), defined career paths (52%) and cultural fit.
There is also a growing challenge to locate the right candidate with the right skills for jobs. It has taken over 90 days on average for 20% of the respondents, 52% take over 60 days.
Over the years, there have been disruptions from reductions in workforce, acquisitions, and raised voluntary turnover. However, overall, turnover remains pretty much the same as previous years; it is down 0.45%.
The section also looks at the top challenges of bringing DEI Programs:
- 67% are unsure what to measure or implement
- 46% have a limited budget to implement a program
- 44% see understanding employees’ perspectives on your culture as a challenge
However, with the current administration’s views on DEI changing, will there be an impact on US thinking over the next four years? It might have been interesting to see whether there were various between the US and Canada on this question.
Financial Management
Last year was one of the most profitable, and profitably is still the second highest challenge from a financial perspective. Funding and retaining talent is still the top challenge, cited by 59%. The third challenge facing the organisation is increasing the financial knowledge of leadership; previously, it was fifth.
The section also looks at key metrics across A&E businesses. Utilisation remains static at 61.1%. The Net Labour multiplier reached its highest level for 10 years, 3.15, up 0.19 from last year and 0.05 from the previous year. High performers reported an NLM of 3.62. Last year may have been an aberration, and the overall trend is positive.
Could this increase continue with further adoption of AI? Will the metric account for digital workers in the future?
Most of the other metrics remain similar to last year, though there are variances by company type. The average collection of payments reduces by 5.88 days to 73.47 days. Will that trend continue?
Jason Dorsey, Deltek Trends Advisor and Workforce Expert, commented, “This year’s Clarity study shows that workforce strategy has become mission-critical for A&E firms. As generational change continues to reshape the talent pool, leaders must be intentional, creating opportunities for engagement, fostering career growth, and understanding the unique perspectives different generations bring to the table.
“Firms that take a proactive approach to developing their people and adapting to these ongoing shifts will be best positioned to drive innovation and achieve long-term success.”
Deltek is also hosting an hour-long webinar about the report on May 15th at 2 p.m. ET (registration required).
Enterprise Times: What does this mean?
Overall, this report is a very worthwhile read. The benchmark information, and the high performer statistics give clear visibility to what business leaders should aspire to. The information around trends, likewise provides a benchmark on what other firms are doing. Firms seem to have similar trends and challenges, despite different sizes.
There are some omissions. While called out in the text, a visualisation would have been useful to see the trend across digital maturity. The challenge with digital maturity is that the goalposts move every year. Potentially, organisations may view what digital maturity means very differently, so deeper analysis is probably required.
What is also missing from the report is a conclusion for the overall report or arguably each section, that provides thoughtful questions and/or actions for business leaders to take that would help them progress towards a high performer status.
