Workday Podcast: The Way Forward for Professional Services Firms

Rich McKay: The last couple of years have brought a lot of change to the professional services industry. Yet, 73% of firms say they may not be ready or able to pivot should conditions change again. What trends will impact firms and how can they adapt to change?

In this episode, part of our Industrious podcast series, we talk with special guest Kyle Wilkinson, strategic industry advisor for professional services at Workday. Kyle shares his thoughts about the future of the industry, discusses insights from the Workday-sponsored research from IDC, and advises leaders about how they can prepare their firms for whatever comes next.

So thanks for joining us today, Kyle, and welcome to the podcast.

Kyle Wilkinson: Yeah. Thank you very much for having me. I'm very excited to be here and talking about this industry. I'm really excited.

McKay: Excellent. So let's start with learning a little bit about you. So could you tell us more about your role and what you do at Workday?

Wilkinson: Yeah. Absolutely. So I'm the strategic industry advisor for professional services, and I cover EMEA. So despite this American accent, I'm actually based here in London. And really, I'm responsible for the go-to-market strategy for our field organization specific to professional services. So a lot of that is working with our internal teams, helping them learn about the industry, but also supporting our customers and helping them see why Workday's such a great fit for this industry, and also working with our product team and making sure we're investing in the right areas so that we have the best solution for the market.

McKay: According to the IDC study, Only 27% of professional services firms say the industry is ready to take full advantage of whatever the future brings. 73% of firms think they may not be ready to pivot should conditions change.

So, Kyle, are you surprised by these numbers? Why are so many organizations pessimistic about how prepared and flexible they are for the future?

Wilkinson: Yeah, I'm not surprised at all. The last couple of years, we've seen a lot of change and a lot of factors that are causing firms to pivot and change and look at new models and look at new ways of delivering the work. The Great Resignation is over, and you're seeing different reactions to that. Some firms seen some layoff of partners. You've seen announcing programs for voluntary exits because we're seeing lower attrition rates in the industry. We're also seeing new competitors, new innovations in technology like AI and ML. So you mentioned being prepared is one of the most crucial things, and one of the best things that firms can do to be better prepared is more proper planning. So firms are seeing the need to have proper planning tools to allow them to analyze their workforce and their talent and the skills that they have within their firm, [but?] also looking to analyze their finances and model out different scenarios so they can make the right decisions to help drive their business forward.

We have one customer, Kanos, that went live with our planning solution in January of 2020, so right before COVID hit. And they talk about how it was just the perfect time because as they went through that very challenging year, they ended up making four acquisitions within that same year. So the timing really couldn't have been better for them to have this new planning solution. It allowed them to not only navigate the pandemic but also help plan and do those acquisitions. But then, after that, proper planning only takes you so far. Many firms are still using the same back-office systems that they've been using for 20 years. So if those firms acquire a new business or explore new revenue models or do something as common as a reorg, it takes a lot longer and costs more money because they're using fragmented systems with old technology that aren't as flexible or agile.

So Workday really helps enable that agility and handles those types of changes really well. So for example, we had a staffing firm customer a couple of years ago. They were owned by private equity. And the private equity decided to split that firm up into two because they supported different industries. And so after they decided to split, the second company requested a new Workday tenant, and within five months, they were live across four countries. So they had two separate entities stood up live and running Workday. So that really speaks to that agility that we have. So after you've planned, you've made those changes, the next really big important thing is innovation. So if you're still using legacy solutions that you've been using for a long time, they're not built on modern platforms. So it'll cause them to struggle to adapt to changes and take advantage of new innovations like AI and ML. So a lot of firms are-- we're seeing this a lot right now. We're seeing a lot of firms investing in modern technology to help them with that scalability, agility, and more importantly, that innovation because there's a lot of changing in technology, and they want to be best prepared to take advantage of that.

McKay: The first example you used about the firm that went live with Workday in January 2020, that's a great example of being ready because three months later, no one was thinking about acquisitions or anything. They just had to prepare their company to deal with such an enormous impact. So for the second question, in the IDC study, professional services organizations listed attracting and retaining the right talent as a top priority. So 47% of organizations listed that as their top priority. Can you share your thoughts on why this remains so critical to firms and what they can do to improve?

Wilkinson: Yeah, absolutely. I think it's funny because if you were to ask this question five years ago, I'm sure you'd probably see similar results. And if you ask it five years from now, I'm sure you'll see similar results. It's somewhat of a constant in this industry. And it's not really surprising because people are not only their biggest asset. If you look at their balance sheet, that's going to be their biggest spend, is payroll on their people. But their people are also how they make money, right? So the people are their source of revenue. So it's just, more than any other industry, talent, and we're talking about highly skilled resources and revenue-generating people, it is really, really important. It is their top priority.

Last year, I was talking to an accounting firm customer of ours in the Nordics, and I was talking to their CFO. And the CFO, first thing he said on the call was, "Attracting and retaining talent is my top priority." And so again, something unique in this industry is that a CFO cares about the talent strategy because, again, that is their source of revenue. That's how they make money. So it's really, really important. So firms need to invest in technology that supports a positive employee experience, helps them with career development, and software that's really easy to use.

Modern innovative technology can help reduce attrition and also can allow employees to spend less time on some of that administrative work and focus on the work that matters most, which is that billable customer-facing work. So again, their talent is what generates revenue. Their talent is also what keeps customers happy, and their people are ultimately what build their intellectual capital and build their brand identity externally.

So in a recent survey, we actually saw a Workday customer in the technology consulting space. They saw attrition go from 12% to 10% since using Workday, which is really, really significant. So if you factor in the cost to replace this highly skilled talent but also factor in, hey, if we lose a headcount, that's also lost revenue, a 2% reduction actually has significant impact in terms of the cost to replace that person but also that lost revenue. So it's got significant impact on the business. And anything you can do to invest in that and just move the needle a little bit in your favor to reduce attrition and help get you the right talent in the door, it makes a big difference.

McKay: Absolutely. And building on that, so the IDC survey also found that most firms struggle with resource management and project visibility. So how has this changed over the last few years? And how can they leverage tech to improve these core needs?

Wilkinson: So historically, firms have either relied on tribal knowledge for resource or project management, or they're using point solutions, or you'd be surprised how many people I talk to today, or maybe you won't, are still using Excel spreadsheets. But now, over the last several years, there's technology solutions that are really helping organizations with the analytics, increasing automation, and improving collaboration, particularly in project and resource management. So it's going to sound so simple and obvious, but honestly, the biggest thing that I find firms missing most is access to real-time data. So for example, if your project manager has their project plan in a spreadsheet or in Microsoft Projects, and then the resource manager either has that knowledge in their head or, again, maybe in a spreadsheet, and then time maybe is entered in one system, and then your invoices are generated in your financial system, right there, we've talked about five or six different solutions. So where's your source of truth? How easy is it for you to pull that together, consolidate it, and get that information into the right hands? How frequently is it updated? How much do you trust it? That's usually what I see as the biggest challenge for firms when they talk about project and resource management. It's just that access to real-time data to help them with it.

So speaking of project management, we actually have a consulting customer in France. They're in technology services. And they implemented a two-day close for their revenue cycle at the end of the month, and it's a really cool thing that they have. So they implemented a dashboard that both their project management team and their finance team use. And it helps facilitate this two-day close process they have at the end of the month. So on that dashboard, they all have the same view. They're looking at the same data. Project managers are proving the actuals, updating their forecast, and that's what's driving the revenue numbers coming in. The finance team can see all that revenue coming in within that two-day period, see who's missing and who hasn't done their work. And it's really a great process. So they're able to do that two-day close for their revenue. And that's, again, because the project management team, the finance team in the same system, looking at that same data in real time.

Now, the same is true on the resource management side. A lot of firms that I talk to, they have a skill repository in their HR tool, but then they're also using a separate solution where they're actually doing project staffing. So they have a second library of skills data. And so what ends up happening there is you end up getting poor data quality that isn't up to date. And that's what ultimately leads to that knowledge being stored in someone's head or in a spreadsheet. I used to deploy a PPM solution, and so again, a point project management tool, and we'd be lucky if we got resources, roles, organizations, and maybe skills as part of that integration to an HR tool. So you end up just with those two separate libraries of skills data, which isn't scalable and leads to poor decision-making. So we're seeing a lot of firms investing in technology for these exact purposes to help them gain insights into that real-time data, help them increase automation, and ultimately just provide a better user experience for project managers and resource managers.

McKay: Excellent. And following up on that, when it comes to investing in the technology to help solve some of those challenges, including building out a more intuitive user experience, improving that data quality you talked about, or even more automation, so what should firms consider when rolling out these investments?

Wilkinson: Well, when I talk to customers, one thing that comes up, for example, in the realm of resource management is strategic workforce planning, and so that's thinking more holistically, looking long-term, and trying to forecast headcount needs in the future and say, "If we win this big contract, what kind of resource are we going to need?" Or maybe there's some seasonality we want to factor in. We're looking at next year's plan for resourcing. Customers always say, "Yeah, of course, that's the goal. We ideally would love to be able to do that, but I still don't know who's going to be on a project tomorrow. So I'm still trying to put out the fires of today before I can start looking at that long-term and do strategic workforce planning." So a lot of them are starting with step one. They need to get maturity in their day-to-day resource management, and that's investing in those things that we just talked about: user experience, the data quality, and the automation.

Now, for resource management, I find for most firms, where they're currently at, it's not usually a technology problem. It's more about your methodology, your business processes, and the teams that you have supporting that function. There's a group called the Resource Management Institute, which focuses solely on researching the resource management function, and they actually developed a maturity model that's level one through five, level one being the least mature, level five organizations being the most mature. And it's not till you get to level three, four, or five where you actually start to see technology be a factor, right? So first, it takes having the right methodology, having the right team structure in place, the right decision-making criteria, the right documented processes, things like that before you start to consider technology. So for firms that have already started that journey, technology is then where they start to look to to drive efficiencies within that resource management function, and they look for features like the skills matching and the resource recommendations like a system like Workday provides.

Wilkinson: Now, another really important factor in terms of resource management is when you start that. So in our opinion, it needs to start well before you've closed the deal. When I talk to a lot of firms, they're still very reactive, and they're trying to change that to be more proactive when it comes to resource planning and resource staffing. So a couple of years ago, we actually acquired a CPQ solution, which we have replatformed. So we have Workday Services CPQ. So a big part of that is actually quoting your services, and one of the main goals is just quoting more accurately and protecting your margin before you've even sold the project. But another really important benefit is then that quoting tool is building out those resource requirements, what kind of roles, what kind of skills that you need, so that your resource management team can be more proactive earlier on in the sales cycle, starting to align those resources. So when we talk about what firms should be doing, how they should think about it, I would say it just starts internally. Doing your own homework, looking at your current processes, your methodology, how you want your team structured, and then find the technologies that's going to help you support that function.

Information to Download the IDC Study: If you’re interested in learning more about the great insights in the IDC paper that we’re discussing? Go to this URL:  workday.com/idcproserv. That’s workday.com/i-d-c-p-r-o-s-e-r-v. That’s where you can download the Workday-sponsored IDC paper, and it’s called “Create Competitive Advantage for Professional Services by Leveraging Technology and Workflow Automation.” And with that, enjoy the rest of the episode.

McKay: So the top investment objective for workforce planning and budgeting are improved data quality and more intuitive user experiences, also followed closely by AI. So does this align with what you're seeing?

Wilkinson: Yeah, definitely. In this industry, it can be very challenging to forecast and to plan accurately. And that actually has a huge impact to your revenue and your cash flow and your workforce plans, which then impacts your decision-making when you're looking at future investments that you're going to make or talent strategies that you want to make to help drive the business. So improving forecasting and budgeting is really important for a services firm so they can better plan for their future, be more adaptable, like we talked about earlier. And we're in a very dynamic environment with increasing economic pressures, new competition, changing customer needs, increased regulation. So this is one area that's particularly going to help firms plan and be more agile going forward.

We actually have a customer that spoke at an event recently with us about their experience with Workday Planning. And what they ultimately did is they started to reshift their thinking so that planning wasn't necessarily just a finance function, for example. So they empowered their business leaders to own and maintain those budgets instead of just having it pushed to them from their finance team. So what it ultimately led to was better user adoption from their business team. It also led to more accurate budgeting and forecasting since their leaders were more confident and they felt like they owned the numbers [and it was?] their input. It also freed up time for that finance team to focus on more value at work. So this is something that's really key for services firms to help them with their decision-making in a very dynamic environment.

McKay: Excellent. And so when integrating automation into their core operational systems, 60% of the C-suite find they are missing key components of project accounting, and 58% of the C-suite find they are missing project time and expense tracking and management. So what are the risks of missing this data, and what can help them?

Wilkinson: So yeah, I'm really excited to talk about this because this is one of the biggest points of ROI that services customers see with Workday because project accounting really is the lifeblood of a services organization. And it really flows through the entire quote-to-cash lifecycle. So earlier, I mentioned how we see a lot of firms using disparate solutions still. And with Workday, all of this is in one system. And there's a lot of benefits that come with that. So starting at the beginning, right, we talked about quoting and having more accurate quotes that have that, where you're able to see and sell the right margin upfront. Then that's automatically going to set up the project and contract for you, which historically is a manual process. So if it's a manual process today to get that project and contract set up, you're prone to errors. And if there's errors, it's, downstream, going to cause delays in either billing or rev rec, which can have a big impact. So that's a key piece of automation right there that'll help with the project accounting like you talked about.

Then it comes to, like you mentioned, the time and expense capture. And again, if that's in a disparate solution, it becomes a bit more challenging and increases the time it takes you to get invoices out the door. Particularly, it hurts when there's changes like missing time and expenses or errors in that process. So at Workday, we have a very intuitive user experience for time and expense capture all within the same system, which leads to less missing time and expenses at the end of a period. So you have to spend less time chasing down those missing transactions that you need for billing and for rev rec.

Then let's get into actually, after you have those operational transactions, you're then generating those invoices in the same system. So you're viewing the transactions. You can make those adjustments right there in the same system, which allows you to get those invoices out the door more quickly. And they're also going to be more accurate. So there's going to be less customer disputes for those invoices. All of this leads to a faster billing cycle and helps you with your cash flow, reducing DSO, and leads to better customer satisfaction because you have that more accurate billing. And then lastly, that all flows right through to the financial reporting. So it gives you a faster period close. It gives you better visibility into, for example, a project P&L or a customer P&L. And from that financial report, you can actually drill right back into those operational transactions because of the same system. You're not having to go back into another system.

And by doing that better visibility and better financial reporting, ultimately, it's going to help you improve your margins and make sure you prevent those overruns before they happen. So again, in terms of the increased automation, the accuracy, the better flow of invoicing, this is an area where we see significant ROI with Workday. And we have a study that we just had a third party conduct recently that actually quantified the benefit of this, and this was by far the biggest chunk of ROI that customers saw, according to that study.

McKay: Awesome. And I guess the big topic of the day is artificial intelligence and machine learning. So in the study, we asked, "How are firms considering using those new technologies?" And they said for recommendations, anomaly detection, and automation. So are there any immediate use cases that come to mind, and are there any customers managing this in a unique way? And furthermore, how is Workday helping with AI and ML?

Wilkinson: Yeah, absolutely. I mean, recommendations, anomaly detection, automation, those are all key components as to how AI and ML can help an organization. So what comes to mind first, if we just take recommendations for example, we talked about it earlier in the sense of resource management, but we've already deployed this several years ago in terms of our Skills Cloud functionality, where we actually can help recommend skills to workers in terms of upskilling their profile and also recommend learning to help them get those skills that they need. So that's just one example of many that we have in terms of recommendations.

On the anomaly detection, we've got many features related to this. For example, Expense Protect, so looking at expense reports that come in and surfacing anomalies on those expenses to help you manage by exception instead of having to go through and review line by line. We also have journal insights, much the same, right, as journals come in, help you detect those anomalies as the journals go into your GL and flag those and provide recommendations for where they might need to go.

Next one, automation. Really good example here is payment matching. We have one customer here in Europe, a very large business services organization. They have over 1.2 million invoices per year that are flowing through Workday, and they're using that payment matching to then match payments to those invoices to help with the automation. And the more they do it, the smarter the model becomes, the more accurate it becomes, and the less reviewing that they have to do, which is going to be significant for their finance team to help free up time.

Those are a lot of things that we currently have available. So we're already helping professional services organizations in those areas. What's really exciting is also what's coming in the future. So there's a lot of hype and talk about gen AI, for example. And at our Rising event just a couple months ago, one feature that we just talked about is our contract analysis. We're actually using our large language models, our generative AI capabilities, to look at the contract that's set up in Workday, comparing that to what was in maybe your CRM tool or the actual PDF contract document that's in the system to try to read both of them and make sure that there's no anomalies in the contract setup. So that is just going to help you proactively identify potential issues. So for example, it may analyze the PDF document of the contract, analyze the contract in Workday, and say, "Hey, looks like the revenue schedule may be off. It says this year in the contract, but it says this year in Workday." Ultimately, that's going to help you prevent those downstream errors that can happen. So we're really excited about features like that, that we're introducing with Workday.

McKay: I love those examples, just the power of AI and ML and how Workday can help, that 1.2 million invoices. You can't do that with disparate systems and spreadsheets. That would seem to be an enormous headache without having it more automated and more technology to help. Okay. So in the IDC study, we also asked, "What benefits do organizations anticipate from embracing connected cloud services?" And the C-suite answered-- 56% answered increased agility and efficiency. 50% said better data insights. And then followed closely behind that was a tie between improving risk management and accelerated innovation. So how can these benefits help firms adapt to whatever the future brings?

Wilkinson: Yeah, some of these things I think we've already talked about. But for the first one, increased agility and efficiency, this is really what's going to enable organizations to swiftly respond to market changes or be opportunistic and execute M&A more efficiently, both from a planning standpoint, planning that M&A, but then also once they're going through it, executing it more efficiently and reducing the cost of that transaction. Also, help them explore new revenue models. Most service organizations right now are looking at expanding and looking at new ways of delivering their work to customers. And so they'll need a system that's not only going to support the revenue models of today but the revenue models they may have in the future. And on the efficiency side, it's all about reducing your cost, doing more with less, and protecting your margins, which ultimately is going to allow you to be a more scalable organization and a more profitable organization.

So for better data insights, I think we talked about this a lot. It all goes back to that real-time data and having access to the right data and getting it to the right people so that it enhances your decision-making, and it's going to help your workforce have a better user experience. It's going to help your business make better decisions and drive that and impact. Risk management is a key one. We work with a lot of different subindustries, and we have some subindustries, for example, like accounting, legal, management, consulting, that are very risk-averse, some of them even open to extra regulation. And so there's not much that can add more risk than fragmented data and manual processes that are hard to track and audit and govern. And so investing in modern technology that is fully auditable, helps increase that automation, and gives them more secure data is really important for them.

And lastly, innovation is key. We're just seeing so much disruption with technology, and professional services firms are particularly cautiously optimistic about technology, but they know they need to invest in cloud services because it's going to help position them to be at the forefront of their industry, be seen as a forward-thinking firm, and help foster that competitiveness and sustained growth as a professional services firm.

McKay: Excellent. And so for the last question, I usually like to ask about the future. So get out your crystal ball a little bit. So what trends and needs will impact professional services firms in the future?

Wilkinson: Yeah, I would say-- I could probably talk about this for a while, but I'll try to maybe stick to two. And the first one, it's going to go back to something we talked about earlier. I think talent is always going to be really important for this industry. And so workforce of the future is something-- I was at an event a couple of months ago, and this was a topic that they talked about. What does that next crop of our workers look like? And this new generation is absolutely going to work differently. They're going to expect to consume and share and work in very different ways. They're going to be an AI-enabled workforce. So firms are looking for talent that knows how to take advantage of that but then also be able to apply it strategically and use it in a way that's going to add value for their organization and ultimately for their customers. And in order to attract that talent of the future, firms are absolutely going to have to invest in modern technology, upskilling and reskilling programs, and they're really going to have to promote diverse and inclusive work environments to help make sure that they're in a leadership position to attract that workforce of the future.

And then the second one, it's probably not a surprise, but technology and innovation, things like AI and ML. I think firms, like I mentioned before, are definitely cautiously optimistic. Most everyone agrees that people are not going to be replaced, right? This technology is just going to increase the quality and the value that firms can deliver to their customers, and they're going to be able to do it more efficiently. So ultimately, that's just going to change pricing models. They're going to need to evaluate how they charge and how they deliver work to their customers. They're also going to need to protect their brands, right? So there's some industries in this space that are regulated. And so they need to be very careful with the application of AI/ML. They need to be able to trust the results and trust what's happening and be able to explain, especially if they're using it for client-facing work. So ultimately, this industry is really going to see a revolution. I think it's going to help this industry actually grow and deliver exceptional quality to their customers. And you know what? Their customers are also going through this significant disruption and change, which is a great opportunity for professional services firms because when their customers are going through challenges, who do you think they turn to to help them through that? So I think it's a really exciting time for this industry. And yeah, I'm excited to be part of it.

McKay: Well, thank you so much for joining us today, Kyle. This has been a fascinating conversation, and I really appreciate you sitting down and talking with us.

Wilkinson: Yeah. Thank you so much for having me. Obviously, something I'm very passionate about. So I love getting the opportunity to talk about this. So thank you very much.

McKay: We've been talking about the future of the professional services industry with Kyle Wilkinson from Workday. In case you missed it earlier, here’s the URL again to download the Workday-sponsoredresearch from IDC that we discuss in this podcast: workday.com/idcproserv. That’s workday.com/i-d-c-p-r-o-s-e-r-v.

If you enjoyed what you heard today, be sure to follow us wherever you listen to your favorite podcasts. And remember, you can find our entire catalog at workday.com/podcasts. I'm your host, Jeremiah Barba, and I hope you have a great workday.