2025 Consulting & Professional Services Year-in-Review (Part 1: Challenges)

2025 became the year professional services firms had to operate at warp speed just to stay in place. A year defined by relentless speed and constant adaptation from the result of rapid technology shifts, compressed client timelines, and even faster competitive cycles. Add in shifting trade policies, inflationary pressures and the rising costs of skilled talent and sustained digital transformation initiatives, and it’s easy to understand why professional services leaders are feeling stretched thin.

Against this backdrop, we spoke to senior thought leaders to understand the key challenges facing the professional services industry in 2025. They shared how the industry navigated a minefield of disruptions and bottlenecks to stay on course for growth and profitability. They revealed that complex project requirements and growing client expectations amid budgetary pressures have forced many firms to rethink their delivery models.

On the execution side, inefficiencies and declining resource utilization rates have strained revenue pipelines. Adding to the woes was a dip in new investments as more clients preferred to “wait and watch” the government’s next move rather than executing their plans. But along the way, they also revealed how their firms harnessed AI and automation to improve growth, efficiency, and productivity, and outlined areas of opportunity and improvement for 2026.

In Part 1 of the three-part blog series, we bring you insights on the biggest challenges for the professional services industry in 2025 and how firms stayed on course in choppy waters.

Challenges in 2025: From Managing Client Expectations to a Dip in Investments

1. Macro-level Uncertainty and Digital Transformation

Uncertainty among clients has been a major challenge, which has created an “inertia around consulting services,” shared Andy Jordan, President of Roffensian Consulting S.A. He blamed cost and revenue uncertainty due to market conditions and trade policies for this tepid client outlook. For PS firms, economic uncertainty impacted revenue growth and headcount expansion. According to the latest SPI report, revenue growth dipped to 4.6%, down from 7.8% the last year, while headcount grew marginally at 1.9%.

Embracing tech advancements is as daunting a challenge as any other for firms as they increasingly gravitate from basic automation to intelligent, AI‑enabled services. The need to enable global and hybrid teams is mandating cloud-first, data‑driven operating models. Plus, greater exposure to AI and algorithms are forcing firms to deepen their focus on cybersecurity infrastructure. Hilary Fordwich, President, Strelmark, LLC, Business Development Consultants listed “adapting to technological transformation” as the biggest challenge for professional services firms this year.

2. Geopolitical Factors and Greater Scrutiny on Public Spending

Geopolitical factors, coupled with tariffs and inflation, “distracted clients,” argued Jason Mlicki, Principal of Rattleback. These changes have left a “lot of clients either distracted or reticent to move on whatever initiatives they prioritized at the beginning of the year,” he said. Greater scrutiny on consulting spending in the public sector had also affected more than a few firms' top-line performance, he added.

Dave Hofferberth, Managing Director, Service Performance Insight (SPI), echoed similar sentiments, noting that “too much infighting in the political arena, tariffs, inflation and uncertainty” have slowed down the economy significantly.

3. Clients Want More!

Aside from macro-level challenges, in 2025, organizations had a tough time coping with evolving client expectations while contending with budgetary cuts and talent constraints. “Clients are demanding faster results, deeper insights, and more flexible delivery models—all while staffing pipelines and project scopes remain unpredictable,” reflected Scott Montgomery, Chief Customer Officer at Worldgate, LLC.

The organizational inability to deliver projects on time and within budget has fueled client dissatisfaction and revenue leakages. A recent industry report suggests that in 2024, only 34% of organizations completed projects on time and within budget, underlining the pervasiveness of the challenge confronting professional services firms.

Navigating constant change while “sustaining energy, clarity and performance” has been the biggest challenge for professional services firms in 2025, said Tissa Richards, CEO, www.tissarichards.com, Keynote Speaker & Award-Winning Author of "Rethinking Resilience: Fueling Your Competitive Advantage." Delivering performance and growth has become more challenging due to "fatigue from years of continuous adaptation,” she said.

How PS Firms are Addressing the Challenges of 2025

From embracing new business models and leveraging technology to expanding client base and service offerings, PS firms have adopted a comprehensive approach to deliver growth and profitability. Here’s a brief rundown of how PS firms are braving headwinds.

1. Greater Focus on Automation & Strategic Partnerships

Scott Montgomery shared that their focus has been on more strategic partnerships, cross-training their teams and “leveraging automation and integration to drive efficiency.” “This has allowed us to remain client-focused while scaling smarter and more sustainably,” he said.

In 2025 professional services firms are increasingly using automation like AI-powered proposal and SOW generation tools to accelerate sales cycles, and adopting automated financial close and revenue recognition systems to shorten month-end timelines. They’re also embracing automation for time and expense capture and predictive resource scheduling to optimize staffing and utilization. These technologies reduce manual effort, improve accuracy, and drive higher profitability.

2. Diversification of Client Base and Service Offerings

Andy Jordan revealed that his firm has diversified its client base and service offerings and focused on how his firm’s services can help “organizations deal with uncertainty by improving their internal processes and ability to adapt.”

Tissa Richards believes that teams and companies that approach “resilience with intention” best manage the challenges of sustained tech integration, changing client expectations and AI adoption. “Reactivity leads straight to burnout. Being intentional about resilience – more so than any new technology – is what sets strong teams and organizations apart,” Tissa added.

3. Adopting Outcome-Based Pricing & Service Models

Some forward-looking PS firms are shunning fixed-bid or time and materials projects, and actively choosing outcome-based projects. A new Gartner report suggests that 4 out of 10 SaaS providers are expected to shift to outcome-based pricing models in 2025. This nuanced strategy is helping them offer clients a unique selling proposition, putting a spotlight on value generated while helping them gain more 'skin in the game.'

As a flexible pricing model, the revenue of such projects depends on business outcomes, encouraging longer-term and often higher-paying client engagement. This approach is helping some professional service firms attract more revenue and retain business.

Conclusion

2025 has been a year of trials and tribulations for the professional services industry. Client and employee-side churn have tested even the most battle-hardened firms. Despite overwhelming odds, firms have responded well by automating processes, diversifying offerings, and fostering resilience within their teams. Strategic partnerships and intentional approaches to change proved critical in navigating fatigue and sustaining performance. The lessons of 2025 underscore why resilience and innovation are no longer optional but the foundation for future growth and profitability.

Stay tuned for Part 2 of the blog series.