Professional Services Industry Aiming to Build Resilience Through Investment in Innovation and Existing Clients
Unit4, a leader in enterprise cloud applications for people-centric organizations, has published the findings of the Pierre Audoin Consultants (PAC) Study: Professional Services – A Benchmark for 2023. This year’s study reveals positivity among professional services organizations (PSOs) about their business performance in the last year, as well as their future plans to build greater business resilience to market volatility through investment in innovation. However, concerns have increased around legacy applications, which must be addressed if firms are to drive operational efficiency and grow revenues.
Building organizational resilience
77% of PSOs predict revenue growth this year, indicating a more cautious outlook than in 2022 when 83% expected a rise – this may be why 85% of firms anticipate improvements in their cash flows, perhaps as they look to build more resilience to economic volatility. That said, 80% of those surveyed expect improved operating profitability, with nearly half (44%) expecting moderate growth in operating profits in 2023, while more than a fifth (22%) expect strong growth. IT Services and US-based firms are the most optimistic about their revenue growth and profit expectations, while the Benelux region is the most pessimistic with one third anticipating a decline in 2023 revenue, alongside financial services firms which 22% anticipate a decline in operating profit.
PSO Barriers to Innovation
Across all respondents, the three biggest barriers to innovation are:
- Legacy applications, with 79% of business leaders agreeing this has become a bigger concern in 2023 compared to 71% in 2022
- A lack of integration between apps (76%)
- Limited insight into critical performance data (66%) – this is the biggest issue in Benelux (39%) and the US (38%), as well as for architecture and engineering and IT services firms.
Just over three-quarters (76%) of organizations identify data integration as a challenge, led by firms in the financial services and “other” business services categories, as well as PSOs in France. This is made worse by 66% of those surveyed feeling that they do not have real-time insight into customer behaviour, market conditions, and operational performance.
“Despite the current market volatility, it is positive that the majority of PSO firms expect to see growth in 2023, but the industry continues to have a significant issue with legacy applications holding back innovation,” said Bryce Wolf, Senior Manager Industry Solutions, Unit4. “Organizations must focus investment if they are to deliver new products and services and grow revenues with existing clients. The goal should be to increase organizational resilience, which will ensure firms have the agility to respond to market opportunities as they arise.”
Investing more in innovation and existing client relationships
Innovation and transformation are the top priorities for growth in 2023, focused around launching new products and services, which contrasts with 2022 when M&A activity was the top priority, but which is now deemed the lowest. They are also the top priorities for 56% of architecture and engineering firms and 49% of financial services firms. To support these objectives, 65% of companies are looking to invest in tools to increase their understanding of customers to help drive loyalty, and 57% will invest in strategies to improve customer retention.
Nearly half (44%) of all PSOs expect to increase digital strategy investment. The most bullish are financial services and architecture and engineering firms, with close to a quarter (23%) in each category expecting to increase their investment by more than 5%. From a regional breakdown, the strongest increases (>5% increase) are expected in France (29%), the UK (25%), and US (20%).
The second priority for growth is customer services, project management, and sales and marketing / resource management to deliver improved operational efficiency:
- Architecture and engineering firms are more focused on project management, and sales and marketing
- IT services see more benefit in resource management
- US firms see the biggest potential for efficiency improvements with 65% identifying strong or very strong potential in customer services, 61% in contract management, and 59% in resource management
- Business leaders also confirm project management is a top priority in 2023, with 57% planning to increase investment.
2023 has the potential to be a positive year for PSOs across the region, but it is critical they do not lose sight of business fundamentals. It is clear that firms are looking to develop more robust and profitable businesses, which need to be built on IT systems that provide a coherent, consistent picture of every aspect of the business – from project management to customer satisfaction and employee engagement. Consolidating and modernizing core platforms will provide PSOs with the foundations to respond quickly to ever-changing market conditions.
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