Key Takeaways From SPI’s 2023 Professional Services Maturity™ Benchmark

The professional services industry improved its financial performance last year, with profitability and growth increasing from 2021 to 2022, but struggled with service execution.

Employee billable utilization and project margins were below five-year averages, and the number of projects delivered on time dipped by 5%. What’s more, project overruns increased by 21%.

That’s according to the“2023 Professional Services Maturity™ Benchmark,”which analyzes the performance of more than 700 professional services organizations (PSOs) of all shapes and sizes.

鼓励,盈利能力增加d in 2022, short-term profit does not necessarily mean long-term gain. The report states: “One might say PSOs worked harder in 2022, but not necessarily smarter. The fact that many performance metrics deteriorated, albeit in a minor way, serves as a warning bell to PS executives.”

What caused the problems with service execution? According to SPI Research,skills mismatches, unclear processes, longer staffing times, and low utilization all played a significant role.

One impact of working harder is employee attrition, which declined slightly in 2022 but is still above the five-year average. Strikingly, firms that achieved over 110% of their annual margin target saw their attrition rate suffer, along with the decline of several other performance metrics.

SPI建议落入Goldil 100%到110%”ocks” zone of revenue targets to staff and sell based on accurate projections and build balanced, sustainable success. If employees are satisfied, they’ll deliver quality work on time. If not, future client satisfaction revenue suffers.

The movement to remote service delivery appears to have stalled at around 66% of all billable hours. SPI believes this may be an “optimal level because it is important for consultants to spend ample face-to-face time with their clients. While Zoom and Microsoft Teams are necessary, a true handshake goes a long way in a people-based market, such as professional services.”

New ways of working have made it far easier to build teams by pulling resources across the enterprise, regardless of locations and time zones. But it’s also highlighted, for a lot of companies, how murky their visibility is on the real skills of their workforce.Intelligent resource managementunlocks real-time visibility into the workforce and makes project resourcing dramatically more efficient, more effective, and more intelligent.

Trends by Geographic Region

年度收入增长在欧洲,East, and Africa (EMEA) increased for the past three years: from 7.6% in 2020 to 11.9% in 2022. This bodes well for EMEA as the region now appears to be recovering strongly from the impacts of COVID-19.

The Asia-Pacific (APAC) region, still battling COVID-19 in 2022 more than any other area of the world, had stable growth after the lows and highs of 2020 and 2021: 3.3% in 2020, 10.9% in 2021, and 7.3% in 2022.

Based on annual profitability, EMEA again had quite a year in 2022—the region saw profitability go up by over 50% from 2020. The Americas also showed stable profitability at 15.5% over the past two years. SPI has always set 15% profit as the baseline every year, and the study showed that each region attained at least that level.

Employee attrition seems to have stayed flat for two years now. While employee attrition over 10% is not usually a positive rate, considering economic uncertainty and the events happening globally, under 15% is not all that bad, the report writers posit.

COVID-19 changed the way many industries look at remote work, including on-site billable hours. Working remotely means consultants can manage several projects each day and with several clients. In 2020, SPI saw profitability rise as travel lessened. APAC declined from 60% of billable hours delivered on-site in 2020 to 45.6% in 2022. EMEA rose from 44.4% in 2021 to 47.1% in 2022, while the Americas went up less than a percent.

What Can We Learn From High-Performing Organizations?

Taking 10 years of analysis, SPI looked at firms with annual profitability of more than 20% to discover the key performance indicators (KPIs) in which these higher performers did consistently well. The goal is to show other organizations how they can operate more effectively.

• Percentage of bids won:Top performers won more than 80% of their bids, indicating that they likely priced right to win and for achieving their margins.

• Days for a new hire to become productive:These firms did a great job hiring and onboarding. Their goal was to get their people working with clients and getting billable hours within 30 days of hiring.

• Commercial PSA solution:Approximately 77% of organizations that are highly profitable useprofessional services automation (PSA), which enables firms to manage every part of theirprojects in a single system—from staffing and project management to billing and financial management.

• Involuntary employee attrition:This usually means there’s a mismatch between the hired talent and the services they can deliver. The goal is to keep this less than 3% annually and have the right people on board, staffed at the right costs, to ensure billable hours.

Integration between PSA, human capital management (HCM), and core financials is also essential to high performance. As the report says, “Integration provides visibility to all parts of the organization and helps break down organizational silos. Achieving client delight and profit in professional services requires tight coordination between demand and supply, which can only be achieved through integrated business applications.”

Looking Ahead

The professional services industry is navigating volatile demand, while ensuring their business is positioned to consistently deliver work and protect their margins, clients, and talent. And while the professional services market has experienced solid levels of growth over the past two years, COVID-19, supply chain disruption, inflation, and war have slowed the economy.

Professional services firms must focus on improved project and services delivery. According to SPI Research, talent will continue to be an issue in2023 and beyond.

Unified applicationscan bring together human resources, finances, and project delivery into one system. With reporting and business intelligence also built into the system of record, professional services firms will have a modern technology architecture that provides unparalleled dimensional insight and actionability in real time.

For more insights on how professional and business service firms can prepare for the future, read the“2023 Professional Services Maturity™ Benchmark,”orvisit our website.