July 10, 2019 ON24
There’s no denying that digital technologies have driven fundamental changes in every single industry, with companies of all sizes swiftly changing the way they do business to maintain their competitive edge. In the face of disruption, organizations in the professional services industry had to adapt their offerings accordingly, assisting clients on their own digital transformation journey.
The professional services sector is diverse, with players ranging from global behemoths providing the full breadth of services in every corner of the globe, to boutique firms with a very specialized offering. It is estimated to be the second-largest employment sector in the US, after healthcare, and is expected to grow to approximately 22.3 million jobs by 2026. It accounts for 11% of the UK’s gross value added and 13% of its employment.
The industry is experiencing rapid change due to the disruptive impact of digital technologies, and companies need to transform their operational and service execution models to adapt to this new reality.
ON24 Tip: Demonstrate thought leadership with a comprehensive webinar program
To capture new business, you need to be at the center of industry conversations and improve your position as a thought leader. Webinars can help you drive those conversations, focus on your points of difference and show how you’re using technology to augment the services you provide.
However, change is not a foreign concept as the sector has been in flux for the last three decades. Since the 1980s, management consulting has gradually shifted from offering bespoke expert services to delivering more standardized, technology-enabled services. The boundaries between strategic and technology consulting have blurred significantly. Similarly, leaders in the accounting sector (the Big Four) have been increasingly operating at the intersection of accounting, consulting and even law.
But this industry-wide transition is not without challenges. Client expectations are increasing, competition from digital disruptors is ramping up and margins are tightening. Professional services firms need to find innovative ways to create value and deliver the best possible outcomes to their clients. The time and materials model, where companies charged for the expertise they provided on an effort basis, proved to be highly profitable but is no longer sustainable.
Turn to technology to provide incremental value and increase your qualified lead pipeline
In the everything-as-a-service economy (XaaS), it has become increasingly difficult for professional services companies to compete. Affordability, timeliness and demonstrable value are among the most pressing client concerns, and there’s evidence that the industry is struggling to meet those demands. Revenue growth has fallen below 10% for the past three years and reported billable utilization dipped to a new low of under 70% in 2018.
Heightened client expectations have led high performers to shift their client engagement models from traditional time and materials or effort-based engagements to delivering services on a performance or outcome basis. These companies have turned to digital technologies to provide innovative services and support more predictable revenue streams. This extends beyond just addressing the disconnect between the front and back office (a problem that has traditionally plagued the industry), allowing them to unbundle offerings and foster engagement outside the project-based model, sometimes even without the need for in-person interactions.
In an attempt to stay ahead of the curve, top management consulting firms opted to develop the technology in-house to augment their services. Deloitte’s Emerging Technology Partner, Marc Verdonk, highlighted the rationale behind doing so: “The client is happy because using the tech means ultimately they often pay less, and we can be more efficient, which allows us to continue investing in innovation, and everybody benefits.”
In the legal sector, lawtech (often heralded as ‘the new fintech’) has continued to rise in prominence as clients demand more transparency and accountability, and push companies to provide more than just traditional legal services.
However, the vast majority of professional services companies are still playing catch-up. Only a fifth (20%) of IT leaders in this sector claim their organizations have been ‘extremely’ or ‘very’ effective at using digital technologies to advance their business strategy. Most of their technology investment focuses on alleviating legacy pain points rather than transforming how professional services are delivered or how the client relationship is managed.
Data and technology are the cornerstones of digital transformation, and the professional services sector is no exception. The convergence of the two is set to shape the evolution of the industry in the years to come, and companies need to keep pace with the change if they are to succeed.