What can PSOs expect in the next year? | Unit4
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What can PSOs expect in the next year?

from  October 12, 2022 | 3 min read

Firms have seen a rise in costs across a range of inputs, including fuel, utilities, food, and other material costs. In some cases, there is even a rise in salaries happening in an attempt to combat the talent crisis. And as a result, many businesses are raising their selling prices. Globally, professional services organizations (PSOs) seem to be doing the same.

How can PSOs respond in a way that ensures survival and success?

As inflation rises, many economies are facing recession, and many businesses are facing a squeeze on their margins. Even before Russia invaded Ukraine, a lean labor market and rising global commodity prices pushed the ‘cost of living’ to crisis point. Coupled with the surging cost of energy, dwindling consumer confidence, and a general downturn in economic growth, many firms are struggling to keep afloat.

By anticipating conditions that will affect them, companies can position themselves for the business climate’s return to a healthier state. But we should be aware – this healthier state is unlikely to resemble pre-COVID times. Firms need to understand the new reality that they need to work and plan both for a new and a future normal.

Clients are going to be much more selective and demanding about projects going forward. Deal flows and talent sourcing will be more turbulent. Delivery talent will require better enablement and support for their new daily work realities.

But the emergence of new technologies and the necessity of deploying them to ensure survival creates a unique situation. Significant opportunities now exist in creating a more holistic and dynamic PSO operating model that can cost less and with less talent loss while increasing margin, and important new types of business and growth opportunities have come within reach to offset recent revenue impacts.

The state of play

In a 2022 PwC Pulse Survey, they found business leaders wrestling with the challenge of achieving profitable growth amid spiraling costs. With inflation at a 40-year high, c-suite executives are pulling multiple levers to manage margins eroded by rising oil and commodity prices, supply shortages, and higher wages.

  • 77% said the ability to hire and retain talent is most critical to achieving growth.
  • 69% do not expect talent shortages to ease this year.
  • 62% are increasing compensation for employees through bonuses and cost-of-living adjustments.
  • 56% are changing processes to address labor shortages.
  • 60% cited digital transformation as the most important growth driver.
  • 62% of business leaders surveyed are likely to pass along price increases to customers this year.

The survey concluded that filling job vacancies and enhancing digital capabilities will also accelerate progress toward other high priorities such as increasing agility, developing new products and services for ever-demanding consumers, improving supply chain resilience, honing pricing strategies, and pursuing M&A.

It is clear that the reality of 2022 is that soaring inflation, talent shortages, and supply chain risks will be with us for a while. Economic growth recovered to a point in 2021, but inflation is now diminishing that growth for many professional services firms.

Digital transformation is increasing agility amid concerns about tech and data regulations

The need for fast, easy-to-deploy, flexible, and adaptable cloud-based systems is key in a rapidly changing environment. Now more than ever, PSOs need:

  • Fast time-to-value implementations that can be customized for their organization easily, resulting in a future-proof solution.
  • Access to ERP systems that innovate faster, cost less, and are less labor-intensive to implement. This means moving from complex, occasional, and costly updates to regular smaller updates.
  • The out-of-the-box customizability from minimal or no-code applications. Customers can adapt the systems to their specific needs without compromising the installed systems’ compatibility with regular updates.
  • Artificial intelligence and machine learning as key drivers for automation, making innovation accessible.

Top executives have always known that investing in digital transformation is the smartest way forward. This year many plan to build on those investments, and with talent in short supply, it will be essential to get the most out of digital investments.

What can PSOs do?

  • Stay focused on long-term value creation. Use automation and tech solutions to increase productivity and improve margins. Integrate ESG goals into business operations to create sustainable business and operating models.
  • Unify the leadership team. Accelerated digital transformation has turned organizational success into a shared responsibility among CEOs, CIOs, CTOs, and their peers in finance, operations, and HR.
  • Focus leadership on attracting, hiring, and retaining talent. Pay and benefits packages need to reflect the economic situation and support people’s evolving needs. Upskilling your people so they can perform more fulfilling roles rather than resigning may become a necessity.
  • Consider how to embody diversity, equity, and ESG goals in your strategies to grow trust among your people and stakeholders.

How can Unit4 help PSOs excel?

We have deep knowledge of PSOs and their processes. With the right technology supporting you, your PSO can focus on People Experience to help free your professionals to do more of what matters: attracting, supporting, and retaining clients.

Our people-centric, project-focused solutions are purpose-built. Firms can better manage their businesses with industry-leading software for Enterprise Resource Planning (ERP), Human Capital Management (HCM), and Financial Planning and Analysis (FP&A).

Read more about the professional service organization landscape with recommendations in the 2022 SPI Maturity Benchmark Report.

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