Digital Transformation: The Opportunities and Challenges for Professional Services Firms
By Neil Davidson, Vice President Enterprise EMEA, DELTEK
Digital disruption is already impacting the professional services industry, and its effects can be divided in two main ways. On one hand, clients are looking for better value and services, and digital solutions offer new and enormous possibilities in this regard, although the cost of keeping abreast of new technologies can appear high. On the other hand, clients are demanding more from their providers and requesting different delivery models, with a marked shift away from hours-based billing to fixed-fee, outcome-based models.
In this complex operating environment, professional services firms need to provide certainty of outcomes; tighter control of costs; and ensure their service offerings are ruthlessly efficient on value and delivery.
However, many firms are struggling to meet these challenges, according to Deltek’s ‘Insight to Action: The Future of the Professional Services Industry’ report, which found that 81% of chief executives surveyed were unprepared to face the risks associated with disruptive technologies.
What is digital transformation?
We all know about the ‘industrial revolution’ that occurred in two stages in the mid-19th and early-20th centuries, and many of us lived through the ‘digital revolution’ of the 1990s. Global economies are now on the cusp of what World Economic Forum founder and Chairman Klaus Schwab has dubbed ‘The Fourth Industrial Revolution.’
Schwab’s book of that title suggests that boundaries between the cyber and physical worlds are blurring, and that emerging technologies – such as artificial intelligence (AI), the internet of things (IoT), robotics, nanotechnology, 3D printing, synthetic biology and genetics – will combine to create a new machine age.
In this era, solutions that seemed unthinkable just five and ten years ago will become commonplace.
What technologies and business models are causing digital disruption?
The most ubiquitous change in professional services industry revolves around the use of mobile technology, which enables clients and stakeholders to obtain instant access to project information within a more dynamic data environment.
At the same time, digital disruptors such as online services and freelance portals are challenging the traditional knowledge base and diluting the respected authority of professional services firms. These disruptors are combining to undermine long-established business models.
As an example, the Wikistrat platform of global experts enables clients to crowdsource problem-solving solutions online, while portals such as Upwork and PeoplePerHour connect millions of professionals globally – such as those based in Southern Asia and clients in the US – which places downward pressure on freelancer rates and eliminates the need for professional services firms to act as middlemen.
Other innovations – like the ones Schwab mentioned above - loom on the horizon too, although the impact of these on the professional services industry is not yet fully known or understood.
Read more about the Future of the Professional Services Industries in the Professional Services Trends Report 2018.
What should professional services firms do to prepare?
Digital transformation goes far beyond IT, requiring an overhaul of the entire business strategy, and will impact all of the activities undertaken within, and beyond, professional services firms.
The best way to tackle these challenges is to establish a change management program for your business, just as you would for your clients at the outset of a major project. This internal program should be led by senior team members who seek to achieve consensus around strategic goals, and then develop and implement the changes necessary to underpin the firm’s transformation.
All of these change management program’s activities and outcomes should be entirely focused on the needs of the firm’s clients, now and into the future.
But how do you determine what those needs are, or might be? According to Deltek’s recent research, 49% of firms are currently unprepared to meet their customers’ needs, so it’s essential to foster more productive dialogue with customers, in order to explore and forecast their future needs for digital services.
What emerging technologies can help firms prepare?
Where the first and second industrial revolutions were powered by steam and electricity, this fourth wave builds upon the transformative power of communications technologies, and connectivity is key. Cloud based ERP tailored for the professional services organisation provides an essential backbone for transformation.
In an era when professional services firms are facing considerable pressures from multiple fronts, Cloud ERP tailored for your industry provides the ability to bring all of the elements that are necessary for future success into one holistic system.
Once this backbone structure is in place, it’s time to add the limbs. These are the innovative tools that exploit the capacity of Big Data, Artificial Intelligence, and the Internet of Things, and they need to be carefully selected in line with the firm’s client-focused strategy.
Of course this entire process is daunting, because it’s not yet clear which emerging technologies will best serve professional services firms and their clients in future. The key is to become more agile and client-responsive now, so that your business is prepared for challenges as they arise, and can remain relevant and keep pace in this increasingly dynamic operating environment.
Preparing for digital transformation head on – while maintaining a strong correlation between technology and profitable growth – is the best insurance policy against the incredible digital disruption that we are currently witnessing, and will enable professional services firms to seize the immense opportunities that will arise in this space.
About the Author
An experienced business professional, Neil Davidson has spent over 15 years’ in client facing roles for Deltek and prior to its acquisition, Maconomy, as Managing Director and Services Director. As Vice President of Enterprise EMEA, Neil now leads the Deltek Enterprise team which takes great pride in partnering with FTSE 100, CAC 40 and large privately owned clients to provide innovative solutions to the diverse challenges of running a global professional services business.
With vast experience advising professional services organisations on the benefits of project-based ERP, Neil’s deep sector knowledge ensures clients meet their objectives for improved profitability, growth and cash flow from the deployment of ERP. Neil holds an LLB in Law from Nottingham University, and a diploma in Strategy from the Scandinavian Institute of Management.
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