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“Smooth sailing” for professional services, but new challenges arise

Posted by  Alan Clark

The industry’s leading benchmarking analyst reports that times were good for people-centered organizations like yours in 2019, and it predicts the same in 2020, but what challenges lie ahead we asked Alan Clark, Sales Director UKI and Nordics, Unit4.

The outlook is rosy for professional services organizations (PSOs) according to the latest report from renowned industry researcher, Service Performance Insight (SPI), which says 2019 was “a year of smooth sailing” as the market continues to grow.  

The 2020 Professional Services Maturity Benchmark shows there was “unprecedented growth” in the sector last year with “improvements in most metrics” for PSOs, which all point to “a fabulous start” to the new decade.

Designed to help you succeed

“The PS Maturity Benchmark report is helpful because it focuses on every KPI that’s important to a Professional Services Organization. It’s specifically designed help you pinpoint which areas to focus on to provide the greatest impact in your business,” says Alan Clark.

“As such, it will help you better understand how your organization compares to your direct competitors (those that are similar in size and scope of work), as well as others in the broader industry,” Alan continues.

Smooth sailing

According to PSI, revenue growth climbed nine percent year-over-year (y-o-y) in 2019 to reach 10.6 percent, its highest level since 2012.

Average billable utilization increased from 69.7 to 71.7 percent in 2019. Headcount grew 29 percent y-o-y, total attrition dropped five percent y-o-y, and productivity improved.

The sector experienced all-time highs for revenue per consultant and per employee; employers saw a slight drop in total attrition, and there were even “incremental improvements” in productivity, says SPI, which adds: “All these leading indicators point a smooth sailing in 2020.”

What challenges lie ahead?

This is of course all good news, but 2020 brings fresh challenges for your firm, and many PSOs are already exploring new business and pricing models in the hope of securing new clients and more predictable revenue streams.

Meanwhile, net profit (EBITDA) dropped to 15.2 percent from an all-time high of 18.5 percent in 2018.

While revenue and headcount growth increased y-o-y, the time to recruit and ramp new employees also went up marginally. And the competition for talent escalated further as the US unemployment rate declined to its lowest level in half a century.

As the war for talent intensified, so did the importance of creating a great place to work by making a real difference to employees’ lives — an essential strategy in a uniquely people-driven organization like yours. To attract and retain the most-skilled talent in 2019, says SPI, more PSOs flaunted their reputations as great employers through competitive salaries and benefits.

The analyst says: “Life-work balance, diversity and giving back are important considerations which are slowly making an impact on the sector.”

In the 2020 benchmark report, SPI notes that the stable revenue and headcount growth were enabled by increased adoption of sector-specific business applications including professional services automation (PSA) and human capital management (HCM).

It says solutions like PSA, HCM and enterprise resource planning (ERP) suites are becoming increasingly critical to the success and growth in PSOs, adding: “The professional services sector is an employee driven market and providing the best tools that provide the best insight underlies all performance improvements.”

This means that by seizing new solutions which make work a better place for your people, your organization can ultimately improve organizational performance.

Learn from The Best and compare with The Rest

The PSI report is an objective, fact-based strategic planning and management framework for performance improvement. It is used by more than 35,000 service and project-oriented organizations to chart a course to operational excellence.

The research, now in its 13th year, compares the industry’s top five percent of PSOs in the report (The Best) with the remainder of the respondents (The Rest). To learn from The Best and compare with The Rest, download the report.

Alan Clark

Alan over 25 years’ experience working with global tech businesses, specifically with cloud software solutions. He focusses on customer success and world-class execution. He loves to work with companies who constantly evolve and focus on their employees first and have a clear success strategy with their customers.

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