A Wake-up Call for Business Leaders

Historically, the professional services industry has played a vital role in helping businesses to fulfil their core goals and achieve efficiencies, covering fields as diverse as IT, engineering, management consulting, architecture, legal, audit, and advertising. Providers support their clients in a myriad of ways, from helping them to formulate strategy, cut costs, and predict risk, to strengthening their processes for managing talent, staying compliant, and auditing accounts.

The industry’s credibility is thus closely aligned with its capacity to stay ahead of the curve while providing robust advice and expertise. Lately this mission has become harder, as the professional services sector itself undergoes a period of change and uncertainty. Firms face an increasingly competitive market, in which tighter margins are the norm and project complexity has increased.

They also must confront a stream of new regulations and deal with skills shortages, not

to mention having to adapt to the wave of technological change that is sweeping the world and disrupting all in its wake.

To understand the problems facing the professional services industry more fully and explore possible solutions we surveyed 700 senior decision-makers from around the globe.

These individuals ranged from divisional heads to chief executives, chief finance officers to chief operating officers, and worked for a variety of companies from boutique consultancies right up to enterprises with revenues of $1bn-plus employing tens of thousands of people. They hailed from more than a dozen countries, including the UK, the USA, Australia, Germany and Sweden, revealing that the broader challenges facing the sector are far from country-specific.

The results of the survey reflect a pervasive concern about the future. Many feel their firms are ill-equipped to tackle current challenges and future risks, expressing a desire for the strengthening of internal systems and processes, as well as core business models. The c-suite and other business leaders lack the foresight needed to prepare effectively for what lies ahead.

A majority believe technology could help overcome these obstacles but many warn that their firms are not taking full advantage of the tools available. Digital business transformation can unlock the knowledge and capabilities firms need if they are to succeed, but this requires investment and planning. Complacency in a more competitive universe may leave professional services firms dangerously exposed.

Balancing Past, Present, and Future

Firms must actively embrace technical and cultural innovations to retain their position in the industry

services sector, the economics of the industry are fundamentally changing. It no longer enjoys the monopoly on specailized knowledge that it once boasted, and margins are tighter. Corporate buyers have become pickier, pushing back against concepts such as billable hours, and requiring fixed fees and more transparency on costs. They are also using different providers for different tasks, rather than just sticking to one.

To thrive in this environment, professional services firms must be agile, nimbly responding

to new threats and opportunities while improving back-office efficiencies. And yet too few have taken decisive action to prepare for the risks ahead.


For now, the professional services industry continues to enjoy robust growth, with average revenue up Current challenges in professional services We don’t get paid for all change requests Our employees are being shuffled around projects We spend hundreds of hours on producing reports Our reports for important decisions come too late We don’t know if we need to hire or fire 3 - 4 months from now 8 percent globally in 2017 and headcount up by

9.3 percent, according to research from Service Performance Insight. The Big Four consulting firms all recorded expansion in 2017, with sales at Deloitte up 5 percent to $41.25bn (£29.52bn), PwC by 2 percent, to $40.23bn (£28.79bn), EY by 3 percent, to $29.84bn (£21.35bn), and KPMG by 4 percent, to $28.5bn (£20.39bn).

Revenue growth, however, has been in decline, dropping from 10 percent in 2015 to 9 percent in 2016 and 8 percent in 2017. As our survey shows, many decision-makers are worried about the future. Some 91 percent of chief executives say they do not think their firm is prepared for regulatory risk, while 51 percent globally consider price pressures to be a top business development challenge over the next 12 months. Only 19 percent expect their firms to be digitally “mature” or “advanced” within five years.

As competition increases, tackling such deficits will be vital. New players are entering the market, and alternative business structures are being deployed. Take, for example, the way the Big Four consulting firms are encroaching on the marketing services industry; or the rise of private equity backed commercial law

firms challenging the traditional partner-based law firms.

Rivals from emerging economies are also giving traditional incumbents a run for their money, in both their home markets and Western ones. Chinese tech giants Tencent and Alibaba have spent a combined $6.7bn (£4.76bn) in establishing 23 cross-border deals in recent years, acquiring interests in companies including Spotify, Snapchat, and Tesla.

New technologies have added to the threat, allowing corporate buyers to handle more of their complex problems in-house and reducing the need to outsource. Clients are able to gain online access to a much greater level of insight into how their profession works, either for free or at much lower prices, and can increasingly do so in real time. Automation is also taking on more of the lower-end tasks once handled manually by professional services firms a trend likely to continue right up the value chain.

Pushing Back..

As profits are squeezed and wages and overhead costs continue to rise, professional services companies are feeling the heat. Having the right foresight to remain competitive has never been more important, and yet many decision-makers complain that they feel in the dark.

Our findings reveal that 58 percent of firms spend “hundreds of hours” working on reports

to enhance business performance and planning. But 53 percent say these reports too often “look backwards and offer limited insight into the future,” while 57 percent say reports for “important decisions” come too late.

In this climate, professional services firms must focus on three key ingredients in order to gain a clear view of the risks and opportunities ahead: pipeline, projects, and people. That means knowing what kind of deals they are going to bring into the business, and when; how much it will cost to deliver those projects; and whether they have the right skills for the job.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Dr Francesco Dergano

Dr Francesco Dergano

Founder and Chief Executive Officer (CEO) of SkyDataSol