Survey Results: Challenges and Opportunities for Professional Services Firms

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Earlier this summer one of my clients, Deltek, sponsored IDC in a survey and white paper on current challenges and opportunities for professional services firms world wide. The phone survey of 280 consulting firms in the US, UK, Belgium, Scandinavia and  the Netherlands targeted line of business (LOB) executive / director / manager level respondents with only a small representation from IT (5.7%).

Earlier this summer one of my clients, Deltek, sponsored IDC in a survey and white paper on current challenges and opportunities for professional services firms world wide. The phone survey of 280 consulting firms in the US, UK, Belgium, Scandinavia and  the Netherlands targeted line of business (LOB) executive / director / manager level respondents with only a small representation from IT (5.7%). The respondent firms were a diverse group ranging in size from very large (10,000+ employees) to small and medium firms, with the bulk of the firms falling between 100-1000 employees (67.2%). The majority of firms were IT / Technical consulting but there was a mix across several micro-verticals. The following shows the distribution of firms:

It’s no surprise really, but all the firms reported some impact from the recent worldwide economic roller coaster, ranging from lower revenue and margin to lower utilization of billable resources and higher DSO. The following shows some of the declines over the past 12 months, and represents the mean of all respondents, the outliers though, were fairly extreme in many cases.

In fact the extremes in many categories were over 25% declines. Of course a 10% decline in revenue is a extreme for many firms.

When we asked about business challenges the top three reported by the respondents were:

1. Increasing revenue

2. Maximizing Profit

3. More effective and efficient project management

Also high on the list was gaining better customer insight and increasing visibility into key business metrics. In a similar question on priorities for the next 12 months the answers were identical for the top 3. In addition firms also ranked gaining better customer insights and increasing visibility into key business metrics very high. 

Across the respondents a couple of IT / technology issues emerged that were linked to many of the challenges and priorities. While there was a good incidence of systems in use, the were clearly places where the firms were not getting what they needed from those systems. The following lists shows the incidence of systems deployed in the respondents by system type. PSA/SRP systems (professional services automation and services resource planning) are of the greatest interest in the survey, since they are the purpose built ERP systems for professional services firms.

The two areas of greatest interest that emerged from the data were: 1. a very high incidence of “home grown” or in house developed systems and 2. a high number of firms operating without integrating the front office to the back office. The idea of providing a system that supports the complete business lifecycle for any business is not a new concept so it’s surprising that more firms were operating without integrating their CRM to their financial and project management systems than had deployed an integrated system (43.6% not integrated versus 41.2% that were). Companies that had an integrated system reported these benefits:

The “home grown” system issue was even more common. Surprisingly many firms are operating with systems that are built and maintained in house. I suppose this is directly related to the fact that only in the past decade have PS firms had a good option for buying a system that is built and optimized to run a project based business. PSA solutions developed in the late 1990’s / early 2000’s and evolved into full SRP solutions over the past dozen years. As you can see from this chart, many firms are still using systems that they built for themselves:

Home grown systems create several issues, not the least of which is the substantial investment resources to maintain them. Beyond that though, we found that in almost every metric firms with in house developed and maintained systems performed well below the norm for similar firms. They had issues with customers insights, lower key metrics like utilization, bill rates, pipeline visibility, project execution, etc. and were more concerned over challenges to growing revenue and margin.  Home grown systems proved to drag down performance, be less efficient, be more costly, inhibit business development and provide less insight.

Anyway, this is just a short look at the results. If you want to find out more, the white paper that I wrote for Deltek will be available on their site.

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