With competition surging and demand soaring for skilled talent, top firms will leverage technology to enable agility and retool strategies. Here’s how professional services leaders can take on challenges and opportunities in 2024 and beyond.
In many ways, the future forecast looks very sunny for the professional services industry. Senior executives are turning to outside consulting firms for expert guidance as generative AI and other disruptive forces upend many industries. That’s one reason why the global management consultant market is projected to jump in value by nearly 60% by 2028.
But while leaders of professional services firms see ample growth opportunities, they can’t ignore a few clouds on the horizon. Competition has increased, reshaped by a raft of M&A, newer tech-savvy firms, and clients less concerned about where a company is located and more about how much value they can get for their dollar.
“The three main challenges we see customers facing are increased competition, new market pressures, and significant talent constraints,” said Patrice Cappello, managing director, professional services industry, Workday, at Workday Rising last year. “The professional services industry has seen more change in the past couple of years than in the previous 15.”
That change will continue in 2024—falling into three overarching themes:
Read on to see how professional services leaders can successfully meet the future.
Leaders in every industry are hearing the same siren song to boost their AI adoption—and to do it quickly. Among professional services leaders, 84% say they feel the pressure to do so, the highest of any industry, per the Workday report “AI IQ: Insights on Artificial Intelligence in the Enterprise.”
But even as the industry prepares to lead clients into the AI future, it's important to acknowledge that some firms are still operating on legacy systems, notes Claudio Valera, Workday Practice Lead, PwC.
Given the benefits that AI and machine learning (ML) capabilities offer—automation of repetitive tasks such as supplier invoicing, anomaly detection in internal audits, and regulatory compliance—old and siloed systems just don’t cut it anymore.
Forward-looking firms understand that AI and ML can do more than just improve the bottom line. The technologies also free up teams to focus on higher-value, more engaging work—a growing employee expectation, Valera says.
“Workers are driving demand to do things differently,” Valera says. “You’re going to have to figure out how to address the technical debt in your company. You need to do it now, or you’re going to get left behind.”
At Pinnacle Group, a Texas-based firm that provides contingent workforce solutions across North America, the firm’s AI approach is now in focus, said Justin Junkel, senior vice president of finance and analytics, at Workday Rising last year. “Ultimately, how can we use AI to let humans do the things humans are really good at?” Junkel asked. “It’s also about not asking people to do things that aren’t much fun, like data entry and generating job descriptions.”
Among professional services leaders, 84% say they feel the pressure to boost AI adoption, the highest of any industry.
Firms that can hit timelines, targets, and cost estimates are the ones that will keep earning customers’ trust and business. Professional service leaders know this—one reason why 42% name accurate services quoting and delivery excellence as top priorities to boost competitiveness, according to a Workday-sponsored IDC survey.
But what will it take to get to more accurate project cost estimates and timelines? End-to-end visibility into operations. Headcount planning, for example, needs to be supported by real-time access to data detailing job roles, talent profiles, worker skills, and recruiting requisitions.
In search of visibility into current business conditions, more firms will scrap old systems for cloud-native platforms that deliver a single, wide-angle source of truth. That’s the kind of 20/20 vision that allows leaders to align capabilities and capacities with expected demands for services—and accurately forecast related revenues.
Most professional services firms, however, aren’t there yet. Among leaders in the sector, 60% say that technology updates are needed to make substantial improvements in resource management, including staffing, sourcing and development, and forecasting, IDC found. Making resource management less reliant on manual processes is particularly important for the industry, with some organizations using AI and ML to match people with projects based on employee skills, availability, career goals, and more.
But despite the need to play catchup, the recognition that firms need more value from their enterprise resource planning (ERP) systems is clear, Valera says. “The biggest trend I’m seeing is an understanding of how important it is that the functional parts of these organizations talk to each other to drive solutions,” Valera says.
“You’re going to have to figure out how to address the technical debt in your company. You need to do it now, or you’re going to get left behind.”
Claudio Valera
Workday Practice Lead
PwC
In the last few years, professional services firms have faced stiff competition when it comes to recruiting and retaining talent. Top applicants and performers had the upper hand throughout the pandemic, with turnover rates rising and remote work entering the mainstream.
And while quit rates have slowed, baby boomers are still retiring faster than they can be replaced, meaning professional services firms need a talent strategy to find and retain top workers.
Key to keeping young talent engaged, rather than heading for an exit, is a next-gen employee experience. Simply sending consultants off to their next assignment, clunky laptop in hand to monitor an email account, isn’t a sustainable practice. Today’s employees “want modern technology that’s easy to use; they want a consumer-like experience,” Junkel said. “That’s part of keeping good talent.”
Another key part of a modern talent strategy is employee empowerment. People want autonomy, including a chance to seek out projects (and roles) that most interest them and to gain skills that fuel career progress. Savvy firms will see the win-win opportunity in embracing a skills-based talent management approach.
Modern HR platforms with integrated AI capabilities can map and monitor the workforce landscape for requisite skills vis a vis specific roles, teams, and functions. This up-to-date skills data can then be leveraged to track deficits and inform both recruiting efforts and internal training programs.
Leading firms will offer high-potential employees the chance to learn new skills and explore areas of interest such as generative AI. (Employees are especially eager to see how AI can help supercharge their efficiency and productivity, a global PwC survey shows.) The benefits of a work environment that fosters skills building are twofold. Engaged employees are more likely to stick around and perform their best, improving client experience in the process.
Fragmented, stale data doesn’t just lead to inefficient meetings or thinning project margins due to off-base cost estimates. Disconnected data hurts agility, precisely the thing firms need to stay ahead of the competition and develop new business models.
The traditional time-and-materials model is very much alive, but many firms now see other ways to meet customer expectations to generate more predictable revenue streams. One example? Everything as a service (XaaS) models that sell expertise- and digital-based services via subscription. The XaaS market is expected to more than double between 2023 and 2027.
In a period of rapid industry evolution, sticking with the status quo is a recipe for irrelevance. But a firm can only evolve—or perhaps even pivot—if it operates with a unified data source. That’s how real-time insights become the norm at strategy meetings.
Enterprise-wide data visibility is now the norm at Pinnacle Group, which replaced its four siloed systems with Workday Financial Management last year. Having all teams working from a single, readily accessible platform came at an opportune time, with the organization now in growth mode and eyeing global expansion.
“With a single platform and the transparency it provides, it’s really helping us to think about our workforce across the world,” Junkel said.
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