Unit4 has published the findings of the Pierre Audoin Consultants (PAC) Study: Professional Services – A Benchmark for 2023.
This year’s study reveals positivity among professional services organizations (PSOs) about their business performance in the last year, as well as their future plans to build greater business resilience to market volatility through investment in innovation. However, concerns have increased around legacy applications.
Building organizational resilience
77 percent of PSOs predict revenue growth this year, indicating a more cautious outlook than in 2022 when 83 percent expected a rise. 85 percent of firms anticipate improvements in their cash flows, perhaps as they look to build more resilience to economic volatility.
That said, 80 percent of those surveyed expect improved operating profitability, with nearly half (44 percent) expecting moderate growth in operating profits in 2023, and more than a fifth (22 percent) expecting strong growth. IT services and US-based firms are the most optimistic about their revenue growth and profit expectations, while the Benelux region is the most pessimistic with one-third anticipating a decline in 2023 revenue, alongside financial services firms, which 22 percent anticipate a decline in operating profit.
PSO Barriers to Innovation
Across all respondents, the three biggest barriers to innovation are; legacy applications, with 79 percent of business leaders agreeing this has become a bigger concern in 2023 compared to 71 percent in 2022; a lack of integration between apps (76 percent); and limited insight into critical performance data (66 percent), this being the biggest issue in Benelux (39 percent) and the US (38 percent), as well as for architecture and engineering and IT services firms.
Just over three-quarters (76 percent) of organizations identify data integration as a challenge, led by firms in the financial services and ‘other’ business services categories, as well as PSOs in France. Moreover, 66 percent of those surveyed felt that they do not have real-time insight into customer behavior, market conditions and operational performance.
Investing in innovation and existing client relationships
The results suggested that innovation and transformation are the top priorities for growth in 2023, with a focus on launching new products and services. This contrasts with 2022 when M&A activity was the top priority, now deemed the lowest.
Nearly half (44 percent) of all PSOs expect to increase digital strategy investment. 65 percent of companies are looking to invest in tools to increase their understanding of customers to help drive loyalty, and 57 percent will invest in strategies to improve customer retention. From a regional breakdown, the strongest increases (over five percent) are expected in France (29 percent), the UK (25 percent), and US (20 percent).
Other priorities for growth are customer services, project management and sales and marketing/resource management to deliver improved operational efficiency. US firms see the biggest potential for efficiency improvements with 65 percent identifying strong or very strong potential in customer services, 61 percent in contract management, and 59 percent in resource management. 57 percent plan to increase investment in project management.
“Despite the current market volatility, it is positive that the majority of PSO firms expect to see growth in 2023, but the industry continues to have a significant issue with legacy applications holding back innovation,” said Bryce Wolf, senior manager Industry Solutions, Unit4. “Organizations must focus investment if they are to deliver new products and services and grow revenues with existing clients. The goal should be to increase organizational resilience, which will ensure firms have the agility to respond to market opportunities as they arise.”