AI in Professional Services: A Key to Profitability in 2025 and Beyond

Professional services (PS) firms are facing headwinds in 2025, including talent constraints, low resource utilization rates and declining average revenue per billable consultant. These challenges have taken a toll on profitability, as PS firms report a steep decline in EBITDA – from 15.4% to 9.8%, the lowest in the past five years.

As project overruns and on-time delivery nosedive due to execution issues, businesses are finding it increasingly difficult to deliver profitable projects. As the industry looks ahead, AI offers a promising path to regain efficiency, optimize resources and restore margin growth.

The ability to deliver projects on time and within budget is crucial for retaining customers who demand greater bang for their buck and are more prudent with their spending. Artificial intelligence (AI) is emerging as a key ally for PS firms as they look to improve efficiency, optimize resources, automate business processes and restore margin growth.

How AI Can Help Deliver Profitability for Professional Services Firms in 2025

Professional services firms are increasingly adopting AI tools to boost efficiency and improve decision-making. These include predictive analytics platforms for forecasting resource needs and project outcomes, generative AI tools for drafting reports, proposals and client communications and AI-powered time tracking and billing systems to improve accuracy and reduce administrative overhead.

Data-backed decisions and real-time insights into key project metrics are proving to be a business differentiator for PS firms, helping increase efficiency and cater to evolving project demands and client requirements. Data attests to the power of AI, as despite a gloomy business environment, deal pipelines grew by 8% in 2024, suggesting that there are enough growth opportunities for firms if they can deliver well!

Let’s look at some ways in which AI can help deliver project profitability for professional service firms in 2025 and beyond.

1. Optimize Resource Pricing and Bid Right

As customers look to minimize losses, they are increasingly commissioning fixed-bid and time-and-materials (T&M) projects. Executing these high-risk and long-tail project types requires immaculate risk mitigation and project execution capabilities. This means businesses must always accurately estimate resource costs and not fallaciously assume that they can fully utilize their resources.

Understanding the actual costs of resources by factoring in utilization, administrative costs and overheads can help calculate profitable project bids with accurate rate structures. AI-powered resource management software can automatically consolidate all project-related costs and determine profitable values for project metrics. This way, managers can place competitive bids after accounting for all costs by leveraging historical data.

2. Find the Right Resources for Projects in Real-time

On-time project delivery rates dropped to 73.4% in 2024 from 80.2% in 2021, highlighting the growing complexities around resource management and project execution. This drop in on-time project delivery rates has coincided with the mainstreaming of remote workplace models. Businesses now hire globally and engage more freelancers and gig workers to bridge talent gaps and lower costs. However, managing a diverse workforce operating across time zones and shifts requires real-time visibility into their schedules and availability.

Even as PS firms adopt professional services automation (PSA) solutions, customer relationship management (CRM) and enterprise resource planning (ERP) solutions to better manage their resourcing processes, multiple ERP solutions can lead to data silos. In such a setup, managers can struggle to manage complex projects as they cannot readily identify and align employees with niche skills. Plus, resource forecasting challenges can complicate project delivery.

In such cases, PS firms can leverage an AI-powered PSA solution with intelligent resource recommendation capabilities. Such a solution can automatically assess resources based on their ongoing engagements and skill sets. This way, managers can request resources by prioritizing specific skill sets, locations and availability. They can allocate the best-fit talent to projects and align high-value resources to high-value projects, optimizing their revenues.

3. Bill Clients Accurately and On Time

New project types and wholesale changes to business models have complicated project delivery. Accommodating multiple billing models now requires highly flexible billing and invoicing systems. Businesses need granular details to create project, user and role-based rates to manage rate structures and align them with cost and margin requirements. PS firms using legacy billing systems that lack configurability and flexibility struggle with dynamic invoicing requirements.

Legacy invoicing systems have rigid invoicing templates that lack customization and the ability to factor in accurate discounts and tax rates. As most PS firms service global customers, they also need multi-currency billing support. Without such features, firms can face billing delays and even share inaccurate invoices with customers, leading to dissatisfaction, loss of credibility and delays in realizing revenue.

PS firms can leverage an AI-powered PSA with a configurable invoicing engine and multiple templates. Organizations can customize their customers’ invoices based on their unique billing needs. They feature multi-currency support and factor in discounts and add ad hoc invoice line items.

With granular rate details, firms can either apply existing rates or create custom ones to generate billing and costing information. Thus, they can bill their customers quickly and accurately, increasing their revenue. PSA platforms also feature versatile bill plan modeling that can accommodate various customer or project billing needs, such as fixed-bid and T&M projects.

4. Automate Employee Time Tracking

Tracking, managing and interpreting work time data using multiple ERP systems can be a daunting task for PS firms. This is partly because employees now use multiple productivity and collaboration apps to manage their daily tasks. Using multiple ERPs or spreadsheets to track employee work time can lead to errors and data silos, impacting decision-making processes. Here, a unified AI-powered time-tracking platform can be a game-changer, enabling PS firms to accurately track, manage and interpret work time data by capturing all billable work hours and plugging in potential revenue leakage.

This pivot to automated time tracking can help address employee productivity and resource utilization issues by shifting organizational focus from merely tracking billable work hours. Additionally, PS firms can access real-time and actionable data insights on employee work time while liberating employees from manual timesheets, making it a mutually beneficial proposition.

5. Tackle Scope Creep

Scope creep is easily one of the most elusive challenges that professional services firms must deal with. It is also one of the leading causes of project failure. Left unchecked, scope creep can derail a project, force it to go over budget or exceed timeframes. To improve forecasting, you must proactively control scope creep. While there are a few strategies to do so, AI’s data-driven approach offers the most effective solution.

Collect Project and Work Information in Real Time: To tackle scope creep effectively, you need access to the latest data about hours worked, work status, work remaining, completion dates, etc. An intelligent AI system can track those metrics in real time for each project and provide you with an in-depth view. Such insights help you make informed decisions proactively before scope creep becomes a problem.

Real-time Budgets vs. Actuals: With access to all the data in real time, you can compare budgets to actuals with the latest information available. This makes it easier to spot trends and possible scope creep at any given time during the project life cycle.

These are just a few of the many ways in which AI is transforming organizational capabilities and helping unlock productivity and efficiency gains. With sustained pressure on profitability and talent constraints, firms will need to turn to automation and unified AI-powered solutions to streamline all facets of project management. Professional service organizations that have embraced AI-powered time tracking and project management solutions have seen drastic improvements in visibility and efficiency by increasing utilization as much as 10% and up to $26,500 in annual revenue per employee.