As of today, it is quite unlikely that professional services firms will dial back on their technology investments – instead, we even see increasing technology investments in order to keep up with a faster evolving competitive landscape. Gartner predicts an annual growth of 5 to 15% for the technology spend of professional services firms – even factoring in the steadily decreasing unit costs for many technologies (e.g., storage, processing, etc.). As firms work through the selection, implementation and adoption of more and more systems and tools, it is obvious that there is barely a true alternative to a “cloud first” strategy.
The cost pressure is on for professional services. Shifting client demands, declining prices, new technologies, and an emerging set of fierce competitors are taking a toll on law, consulting, tax, and accounting firms. Especially in times of crisis, cash is king. Once the topline deteriorates, outlasting the competition requires superior cost management. COVID19 is surfacing which firms have successfully adjusted their business and operating models and will be able to cope with the harsher climate of a global recession – and the accelerated digital transformation of professional services. But what exactly are the cost levers when the game is no longer about utilization and hourly rates?
The pandemic may have put the final nails in the coffin of the „time & material“ model in legal, consulting, tax and accounting firms. But what are leaders, partners and managers focusing on when the game is not about „utilization“ and „billable hours“ anymore?
So, here is a framework to grasp and think through the management implications of the next generation value chain for professional services:
In order to thrive as a next generation PSF, leaders and managers need to acknowledge the need to hire, grow and retain top talent outside of traditional career paths – offering alternatives to contribute to a firm‘s success, to shape its path and drive its future.