Top 5 Trends for Professional Services Organizations in 2023
The professional services industry has undergone tremendous changes since the COVID-19 pandemic upended traditional wisdom and processes. Yet, professional services organizations (PSOs) have shown remarkable resilience and adaptability in the past three years. They have adopted new technologies and transitioned from traditional, legacy systems to technology-based solutions that are powered by automation and machine learning. However, the focus has equally been on adopting new workflows, revisiting the company culture to make it more employee-centric, inclusive and collaborative, and finding new ways to acquire and retain customers.
Plus, PSOs are seeking ways to streamline daily operations as they embrace new ways of working, with remote and hybrid workplaces taking center stage over traditional brick-and-mortar setups. These are not piecemeal changes but substantive and longer-term shifts from established mechanisms that are likely to remain permanent fixtures.
As PSOs make these wholesome changes, it is important to assess the likely trends. In this blog, we are examining five likely trends for professional services organizations in 2023.
1. Focus on Revenue and Margins
One of the big takeaways for businesses in 2023 is that almost 73% of PSOs expect revenue growth, indicating a generally positive industry sentiment, according to the TSIA 2022 Tech Economic Sentiments Survey. However, PSOs also expect layoffs and budget cuts despite the likely upward swing in revenue. Sample this: the same survey findings reveal that 49% of companies expect hiring freezes or potential layoffs in 2023. Meanwhile, 57% of companies expect their budgets to be flat or reduced in 2023. These sentiments underline that all is not well. PSOs have commendably navigated uncertainties and a choppy marketplace. However, they should focus on revenues and margins more intently, while juggling hiring freezes or downsizing and reduced budgets.
PSOs should assess whether or not they are:
•Accessing accurate time data
•Profitable by clients/projects
•Taking projects that their teams are good at
•Quoting the right price for their services
Ideally, PSOs should bid for high-margin projects by leveraging historical data like pricing, time, resources, scope creep and change requests. They should adopt a per-engagement pricing strategy by understanding the total cost of doing business and performing scenario pricing analysis. Plus, focus on 100% resource time by automating time data collection and timesheet processes. They should set billable targets by role, teams and location and measure utilization.
2. Embrace Fixed-price, Repeatable Projects
The TSIA 2022 Professional Services Benchmark survey reveals that almost 95 percent of PSOs base the pricing of professional projects on the time, material, and fixed-price approach. Meanwhile, only five out of 100 PSOs use the value-based pricing approach. However, PSOs will likely change their outlook toward pricing their projects, focusing on fixed-price and repeated projects. Such an approach offers the following advantages:
- Such projects can be sold easily via eCommerce
- Eliminates over-customization
- Easier to continually improve project quality and margins
As “fixed bids” translate into higher revenue risks, PSOs are more likely to adopt a new pricing strategy for their projects in 2023. Hence, enterprises need to ask whether or not they forecast project risks accurately and have a unified view and are not wearing “colored glasses” due to siloed data. They should check if they practice the agile delivery methodology, have a real-time pulse of the projects and have clear visibility into budgets vs. estimates vs. actuals.
Answering these questions will help PSOs ascertain the road ahead.
PSOs should forecast project risks by kick-starting project risk forecasting. Plus, they should get a real-time pulse on schedule, budget, and margin risks. Going global for resources by embracing the global resource model as ‘virtual’ is the new normal, and PSOs should adopt it. Besides, they should leverage resource cost arbitrage to drive margin efficiencies and focus on project execution by adopting a “Mission Control” style operation with real-time dashboards. Add to that, PSOs should consider that repeatability requires delivery process automation. So assessing processes and shifting from legacy systems to automation solutions should be the way forward.
3. Develop a Culture of Knowledge-sharing and Collaboration
The pandemic has changed the way we work. As PSOs shift to hybrid and remote workplace models, they need to revisit their organizational culture and inculcate ideals like knowledge-sharing and collaboration. These values and cultures help ensure seamless operations and stakeholder experience, especially when teams are primarily working online.
PSOs can easily answer whether or not they have instilled a culture of knowledge-sharing and collaboration by understanding how well they manage the knowledge-sharing between sales, delivery, HR and finance teams. They should examine whether or not the teams engage and collaborate more often. Check if there is a gap between what is being sold and what is being delivered. And if they can leverage the project learning history and trace information end to end.
After a detailed assessment, businesses should enable collaboration by aligning all people on a common data platform. Important to note here that data integration across systems is the key. Adhere to processes by standardizing them and monitoring adherence. Instill management discipline by empowering a culture of sharing and collaboration. It is a science and should not be managed like an art.
4. Create a Path to Renewable, Subscription-based Offers
It is not esoteric wisdom that acquiring new consumers and turning them into billable assets is a challenging task for any PSO.
However, PSOs should first consider finding answers to the following:
- Can they manage subscription or recurring revenue models?
- Can they plan and execute repeatable or renewable projects?
- Do they have the flexibility to adapt to evolving engagement models?
Ideally, PSOs should:
- Say no to purpose-built solutions by evolving subscription business models that require adaptability
- Support recurring subscriptions, prepaid and repeatable or renewable engagements
- Institutionalize subscription revenue management
- Forecast and manage recurring earned revenue and recognizable revenue
- Stay on top of work in progress. They should align WIP with the recurring billing model
- Reduce invoice time, and bill completed work immediately
5. Improve Resource Forecasting and Skills Tracking
Resource forecasting and skills tracing have assumed immense importance as professional services enterprises juggle diverse projects amid a relentless employee-driven change in the workplace ecosystem. Case in point: trends like mass resignations and quiet quitting. Hence, resource forecasting and skills tracing are essential for project profitability as much as for ensuring employee well-being. This never-before focus on ensuring employees are not overburdened with deliverables and work on tasks that best suit their skill set mandates a greater emphasis on resource forecasting and skills tracking.
According to TSIA Professional Services Benchmark, it takes an average of 48 business days for a newly hired consultant to become billable. Hence, PSOs should assess their resource forecasting and skills tracing abilities by answering whether or not they can forecast resources to adequately staff all projects. Plus, whether or not they can forecast skills gaps, know people’s availability by role, location and skills in real-time. And now how loaded their resources are now and in a month/quarter from now and gain visibility into the “hidden bench.”
Then, PSOs should future-proof resource forecasting by gaining a single source of truth for people, skills and competencies. Embrace AI/ML-driven resource matching and project allocations using an integrated global time-off mechanism to gauge real-time resource availability and expose the “hidden bench” for accurate forecasting
PSOs can track and manage people’s skills by consolidating skills and resource management into a single platform and constituting two levels of skills management – standardized skills and individual skills. Plus, empowering and encouraging people to constantly update their skills will help.
How Polaris PSA Can Help Professional Services Enterprises
Polaris PSA offers several features that empower global professional services organizations with powerful resource, project, and financial management capabilities.
Some of them are listed below.
1. Intelligent Resource Management
Polaris PSA features AI/ML-based advanced technologies that help manage resources in an autopilot mode to optimize growth.
2. Cost Optimized Resource Allocation
Polaris PSA accounts for user schedules, time off, and other details when distributing allocated hours to days for more optimized resource allocation.
3. Complex & Customized Selection Criteria
Users can set the importance of specific skill sets when requesting resources to locate the best resources for every project.
4. Powerful Dashboarding
It brings a project’s scope and margins to the forefront. It is the first PSA tool to focus on the scope of work, and offers detailed insights into project budget and scope variances.
5. Smart Task Management
Polaris PSA provides greater clarity and ease of use, while managing project tasks by leveraging the industry-leading, intuitive project interface.
6. Powerful Financial Management
Users can eliminate revenue leakage and increase profitability with real-time visibility into budgets.