There are big growth opportunities for Professional Services firms in the coming years if they address key challenges like retaining top talent and meet changing client expectations.
Changing market dynamics, technologies and competitive landscape means that Professional Services organizations need to constantly evaluate their strategy to retain credibility and grow. As market conditions become difficult to navigate, businesses need to learn how to leverage existing talent and hire consultants with the right skills mix, including knowledge of latest digital technologies, analytics, and Artificial Intelligence.
The good news is that for those businesses who can get their act together, there are big opportunities on the horizon.
What is the Professional Services market size and growth potential?
High inflation and its effect on margins along with the risk of recession in 2023 has prompted CEOs and CFOs to tighten budgets, leading to uncertainty. However, for businesses that are able to look beyond the current challenges and think about the future, there is a lot of opportunity on the other side.
The Professional Services market grew at a CAGR of 2.8% between 2015 and 2020, and that growth will accelerate to a CAGR of 7.03%. That means a market growth from $5028.98 billion to $7063.92 billion by 2025*.
However, high inflation and the likely recession in 2023 are causes for concern, but this will be an opportunity for businesses to find ways to reduce costs and prepare for the next growth cycle. One of the ways Professional Services firms can use this time to their advantage is by moving to the cloud to optimize processes and control costs.
Choosing an industry-specific solution that reduces risk and is faster to deploy will go a long way in achieving growth goals.
Professional Services industry trends
Perhaps the biggest noticeable trend in Professional Services is the shift to offering more of virtual consulting. This shift has been a gradual process that started years before the pandemic. Businesses that were able to adapt to this change of delivery method stood a better chance to pull through the challenges in 2020 and take advantage of the opportunities in 2021.
Changing pricing models
Now more than ever, clients are interested in reducing risk. One of the ways to reduce risk is to find different pricing models. Service delivery can quickly lead to cost escalations due to multiple reasons, including inefficient scoping and additional requests . That is why organizations are now looking at fixed-price and outcome-based pricing.
Adoption of cloud-based automation solutions
Businesses that rely on manual effort may face the weight of their processes pulling them down. The need for software like Professional Services Automation (PSA) and other cloud-based solutions can help you reduce cost, drive efficiency, and build a more profitable business.
Growth strategies for Professional Services firms
Having the right tools and technologies will set your business up for growth, but you need to have the right processes and people in place to leverage these technologies and achieve your business outcomes.
One approach to framing the strategy is to recognize the industry trends and adapt. The common theme for virtual consulting, changing pricing models, and adopting automation solutions is the ability for the business to be agile. The workforce has to be agile to incorporate these changes quickly, and they need the right technologies to support that change.
You will also have to consider other aspects of the business when designing the strategy. There are a few elements of the business you need to consider strategically to create a culture of growth.
- Build on the goodwill of existing clients to increase share of wallet or ask for referral business
- Estimate profit potential of projects in the pipe and dedicate more time to staffing and planning for those projects
- Improve delivery processes, optimize costs, and invest in technologies to improve profitability
- Continue to build a differentiated value proposition to win new clients
- Invest in employee skills and aim to deliver more value to clients with existing workforce
- Create SMART (Specific Measurable Achievable Relevant and Time-bound) goals and ensure that there is a balance between higher revenues for business and work-life balance for consultants
The mistake Professional Services firms should avoid
Even with the right tools, processes, and technologies, some businesses make mistakes that have long-term impact. Mistakes are generally made under pressure and when there is no strategic direction for the firm.
According to Harvard Business Review, one mistake Professional Services firms make when times are tough is chasing clients who aren’t aligned to the core interests of the business. The pressure to close deals and generate revenue is a short-sighted approach that weakens the market position of the business.
For a business to be successful, there has to be synergy among the kind of clients the business goes after, the in-house capabilities, and the strategy. If your consultants have specialized skills to cater to the needs of a specific kind of clients, and you have a strategy that aligns to those capabilities to build them up further and win clients that are aligned to those skills, you build a long-term growth potential. With this approach, you will build standardized processes to reduce cost and deliver more value to clients who will continue to work with you and help you win new business through referrals.