Like many sectors, the professional services industry has faced strong headwinds over the past 18 months. Services firms were forced to quickly adapt to new ways of working as the global health crisis accelerated the move to digital systems and processes. Some organisations have fared better than others, with varying results across different vertical industries. However, what is evident is that those that have maintained a high performance have placed data and visibility at the heart of their business.
Dave Hofferberth of SPI Research and Brian Siefkes of Sage Intacct recently delved deeper into the market trends affecting services companies in 2020 in a brand new webinar, By the Numbers: Accelerating Through Change in the Professional Services Industry. They discussed the findings of the annual Professional Services Maturity Benchmark report, which examines data from 229 independent professional services organisations from all over the world.
One of the biggest takeaways from the research is that maturity matters – increasing maturity directly increases financial performance. For example, mature organisations using a structured or standardised delivery methodology to complete work on time and on budget, will impact client satisfaction, making future sales easier. This means the visibility and collaborative capabilities offered by the organisation’s information infrastructure is critical to achieve growth, profit, and both client and employee satisfaction.
Elsewhere, we’ve seen a growing for off-site work within the sector – unsurprising given the physical restrictions imposed during the pandemic. For the first time we’re seeing management consultancies drive less than 50% of their revenue on site, which indicates those firms are quickly pivoting in response to the restrictions, despite being an industry where face-to-face engagement is critical.
However, professional services is incredibly diverse, so even a large scale macro-economic impact is going to hit the different sub-sectors very differently. Marketing and advertising agencies, for example, fared better than companies in other industries – in part because there was very little travel in 2020. Combined with the trend towards digital advertising, many organisations called on these organisations to help get in front of their customers.
There are some regional variations, too. The European market did a better job of growing revenue despite larger discounting in 2020, whereas the North American market excelled in service delivery. North American firms sell larger projects and deliver them more on time, more often and more frequently, with lower overrun than their European counterparts. All of this adds up to higher profitability in the North American margin market, which bodes well for future growth in 2021.
However, organisations last year were forced to ramp up their service discounting to ensure they won business. Meanwhile, the average number of billable hours for organisations with fewer than 300 employees dropped to a new low level.
The crisis meant they needed instant visibility into the status of their projects, and they once again needed data to support their operations. The ability to capture and analyse data is paramount in driving performance and profit. And the bottom line is that those companies that improve their financial visibility, improve their financial performance.
And while having financial solutions is important, applications that your organisation uses are critical to success. So connectivity matters, and the ability to integrate with that core information infrastructure is now more important than ever. As is the ability to pass that data to various devices. The good news is, with the advent of the cloud and API-based programming, achieving connectivity is easier than it’s ever been.
We’re seeing those organisations where the barriers of legacy systems have been removed are enjoying tangible benefits. If they integrate their CRM with their financial management system, for example, they can harvest better forecasting data, gain insights into campaign spend and deliver real-time data to their project managers who can make better, financially-minded decisions in the moment with the customer.
Mature, successful companies understand the value of data, and of making that data available to stakeholders across the organisation. It is critical that where possible, this information is visible to everyone so that better decisions can be.
As a best-in-class cloud financial management solution, Sage Intacct provides real-time dashboards that easily connect with an organisation’s broader ecosystem of solutions. Hear more insights into the professional services market with the By the Numbers: Accelerating Through Change in the Professional Services Industry, see how your business compares to others in the sector and understand what you can do to improve your products, marketing, sales and service delivery to grow your revenue and profit. (link to webinar here)
- You can also watch Sage Intacct’s free Professional Services product tour here to discover how organisations like yours can improve project profits by up to 20%.