Deltek Clarity Study: How Are Architecture & Engineering Firms Across Europe and Asia Pacific Solving Todays’ Business Challenges?

Tweet it:'Discover the top trends for architecture and engineering firms in the 3rd Annual Deltek Clarity A&E Industry Study, based on insights from 600 decision-makers.'

Architecture and engineering (A&E) firms are facing a changed world. Rising costs and a competitive environment keep business leaders focused on transforming their technology and processes just to keep up.

The 3rd Annual Deltek Clarity Architecture and Engineering Study highlights that this is the case across Europe and Asia Pacific. However, with restrictions easing and opportunities opening up, the urgency we saw in last year's report has reduced, and leaders are looking to make sure their investments are the right ones for their firms.

Technology plays a key role in securing A&E firms’ futures

Technological advancements are accelerating. And with 80% of respondents believing that investing in technology to improve operations will help their firm win more business, its clear technology will play a key role.

And for many firms, preparing for the future is about learning from the past. 64% say that the pandemic highlighted weaknesses in their operations model. This has shown them where to focus their investments, with 40% of firms investing in IT infrastructure that will give them the flexibility to keep pace with unpredictable business environments.

Firms are less optimistic than they were last year about their digital maturity. Only 2% see themselves as currently in the 'advanced' stage of digital maturity, compared with 4% last year, and 13% are in the 'mature' stage, compared with 14% last year.

Firms also have lower expectations on their digital maturity in five years’ time than they did last year. Just 29% of firms say that their digital transformation maturity will be 'advanced' in five years, compared with 40% last year. This could be a result of the pace of technology change and increased awareness of what true digital transformation will look like for their business.

Project management shows positive signs, but faces many obstacles

Firms face many project management challenges such as staff shortages, skills development, corporate social responsibility demands, and project complexity. These challenges are interlinked, so resolving them requires a layered, strategic approach.

The Clarity survey respondents cited their top three project management challenges for the next five years:

• 47% say increased competition for talent
• 47% say adoption of artificial intelligence
• 46% say developing the right knowledge and skills

But in addition to this, they highlighted their top three project management strengths – with 37% citing qualified project managers, 36% mentioning collaboration and communication, and 35% saying they have the right software tools.

We also asked about some of the initiatives firms plan to pursue to address project management challenges in the next three years:

• 33% will hire more qualified staff
• 32% will invest in better software tools
• 31% will increase staff headcount
• And 28% will improve project information management processes

Finding and retaining talent requires new approaches across departments

Staffing challenges continues to sweep across every industry – including A&E – but also are becoming more prevalent in every area of the business. People are searching for more fulfilment in their work, leading firms to reassess their talent strategies to make sure they can attract and retain talent.

And the challenge of finding and retaining good talent is being felt by A&E firms across multiple areas of their business:

• 437% of firms name staff shortages as one of the top challenges for project
• 34% say finding IT talent is a top challenge for IT operations today
• 29% say finding and retaining qualified staff will be a top challenge for financial `leaders in the next three years

Firms recognize that one way to attract and retain talent is to focus on employee wellbeing. And this is something that firms are already putting into practice – 76% indicated that they have a significantly higher number of initiatives to support employee wellbeing than two years ago.

Increased competition is the biggest challenge to business development

A&E firms operate in a highly competitive environment. Our respondents clearly feel the competitive pressure, as their top three business development challenges for the next three years include:

• Increased competition – 38%
• Increased cost of competing for projects – 35%
• Identifying new prospects – 32%

So, what are firms prioritizing in the face of these challenges? Across the board, A&E firms are looking to geographical expansion with 76% of respondents reporting they're better positioned to break into new markets or segments than 12 months ago.

Different sized firms are prioritizing different financial management initiatives

Financially, the landscape for A&E firms is complex. Companies must strike a balance between controlling their costs in the present and making investments for their future to create sustainable growth.

A&E firms also expect their most significant financial challenges to change over three years. While 38% see cash flow as the biggest challenge facing them today, only 30% expect this to be one of the top challenges in three years.

However, there are some challenges that firms expect to increase in prevalence in the next three years:

• Finding and retaining qualified staff (increasing from 29% today to 31% in the next three years)
• Alignment with executive management (increasing from 24% to 28%)
• Succession planning (jumping from 22% to 29%)

Firms still expect managing growth and increasing profitability to remain top challenges as labor costs and the cost of doing business continue to rise. Firms will need to more closely monitor their KPIs and proactively manage their costs.

The complexity of these challenges led to diversity among our respondents around how to tackle them. Small firms (20-50 employees) are the most likely to prioritize encouraging people to register their hours on time (33%). Medium-sized firms (51 – 250 employees) are more focused on limiting project cost overruns (37%) and ensuring clients pay without the need for chasing (32%). And large firms (250+ employees) are the most likely to prioritize fixed price contracts.

Where does your firm stand in relation to the rest of the industry?

A&E firms share common challenges across technology, project management, human capital management, business development, and financial management. But firms’ approaches to overcome these obstacles differ based on where they are today and where they want to be, so now is the time to take action to drive your business forward and stand out in a crowded market.

Read the full Deltek Clarity Architecture & Engineering Industry Study to explore these results in more detail. And you'll also be able to see key financial benchmarks and KPIs to assess where your firm stands.