Unit4, a leader in enterprise cloud software for people-centric organizations, today announced the findings of Professional Services in Europe:

A Benchmark for 2022. It commissioned the study from PAC to analyze the views of business leaders at 250 professional services firms across the region operating in sectors including architecture, engineering, management consulting, IT services and financial services.

The study suggests significant optimism among professional services firms, who now see a rise in the demand for external skills to support digital transformation programs. However, as the industry is one of the fastest consolidating in Europe the need to smoothly integrate acquisitions is an important success factor. At the same time legacy IT systems are hindering innovation, all of which could impact the ability to capitalize on revenue opportunities. The research also reveals firms are searching for the right blend of resources to fulfil client needs, and there are growing concerns about workforce attrition. 

Gearing up for growth

PAC found significant optimism among professional services companies as 83% of business leaders expect revenue increases in their current fiscal year. Firms in the UK (54%) and France (43%) are the most bullish about their prospects, expecting either strong or very strong improvements. Overall, 82% also expect their number of accounts to increase with IT services firms (94%) and financial services organizations (87%) the most optimistic. 

Firms are very focused on gearing up for growth. 50% say that acquiring new customers will be a primary driver, which increases the pressure on staff utilization and project delivery. Almost 40% of European firms state that mergers and acquisitions will be a primary focus, which speaks to increased competition and an appetite for market consolidation. 90% are counting on repeat business with existing clients as a primary or secondary driver for revenue in the year ahead. 85% view decarbonization requirements as an opportunity for new revenue streams.

“It could be tempting, as optimism returns to the professional services sector, that business leaders choose to avoid addressing the key issues raised in this study,” said Nick Mayes, Research Director, PAC. “It is more important than ever to have the right strategies in place to sustain growth and operate with the flexibility to adjust to what are still quite volatile market conditions. 2022 may not quite be a year of ‘consolidate or be consolidated’ but firms should be under no illusion that alongside growing opportunities market pressures are accelerating.” 

Growing pains: legacy systems and workforce attrition top concerns

Recognizing the urgency to stay ahead of the competition, respondents have raised concerns about blockers to innovation and the ability to attract and retain talent. Significant issues have been raised about technology readiness:

• 71% view dependence on legacy applications and a lack of integration between key applications as a primary barrier to driving innovation 

• 62% suggest a lack of insight into critical performance data is a blocker to innovation 

From a talent perspective 60% of organizations reported an attrition rate of more than 10%, with 30% recording a level of more than 20% attrition. This is worse in IT services firms and management consultancies, where 44% and 42% respectively have an attrition rate of more than 30%.

There are also some issues around utilization rates and project delivery. 19% of all respondents admitted they failed to reach the 70% mark for staff utilization, which is seen as the industry benchmark. This rose to 22% in the financial services sector. Equally there is a concerning 11% of projects not being delivered on time, which rises to 14% of architecture and engineering firms.

“Future success in the Professional Services industry will depend on how innovatively firms can respond to client demands,” said Mark Gibbison, Head of Strategic Motions for New Business, Unit4. “That requires an IT infrastructure built on agile foundations and designed to deliver a single source of information. Firms are also going to have to pay close attention to resource management to avoid talent attrition and maximize repeat revenue from existing customers.”

Greater emphasis on flexible and creative talent strategies

81% of professional services firms plan to grow their workforce to support their targets and organizations are increasingly leveraging a more diverse blend of resources, supplementing permanent teams with sub-contractors, freelancers, and partner ecosystems.. This requires greater focus on talent strategies, so unsurprisingly the study shows PS firms being flexible and creative in their approaches including 50% of respondents continuing to commit to remote work through 2025. This is higher in the Benelux (57%) and UK (56%) in contrast to only 32% in Germany. 

Firms are also looking at other ways to track employee satisfaction with 64% monitoring employee wellness to get a more rounded view. Interestingly, 84% of leaders believe adopting decarbonization strategies will be critical to their ability to attract the best talent.

Concerning management consulting findings

Management consulting firms are the most negative about their prospects with 32% expecting a dip in their current year revenue growth and more than one-third (36%) anticipating a decline in profitability in the current year. The more cautious outlook from management consulting firms underlines how crucial effective planning and control will be to the success of professional services organizations against a volatile economic backdrop. They also appear less flexible around talent strategies with 76% of business leaders expecting staff to spend the majority of their time in the office by 2025.