GURUS Cloud Connect Ep. 14
What are Professional Services?

 

What is the Professional Services (PS) industry all about? We’ll spend this episode taking a quick look into the history of professional services so we can help answer where it originated from, when and why it started to grow in popularity, what challenges the industry eventually faced and faces today, and how advancements in technology allowed the industry to flourish.

Episode Topics:

What are Professional Services?
A list of common Professional Industry firms.
The History of the Professional Services Industry
Modern-Day Challenges Faced by Companies in the PS Sector
Unique Solutions for PS organizations
Technology Designed for Professional Services

Talk to an Expert About Cloud Technology for Professional Services

 

Episode Overview:

Episode 14 of GURUS Cloud Connect delivers top-notch information on one of the most crucial industries that define one-third of the global economy: Professional Services.

To kick start the topic of Professional Services, our hosts will chat about the history of the Professional Services industry, how the sector has advanced over the years, as well as the modern challenges currently faced by companies within the sector.

The discussion ends with an analysis of the unique solutions and technologies PS companies can invest in for a successful business growth.

 

Episode Takeaways

 

What are Professional Services?

The Services sector is large and diverse. It’s home to industries like: creative agencies, IT services, Management Consultancies, Architecture and Consulting firms - the list goes on.

The Service sector, or the Tertiary sector of economy, is the third of three economic sectors that define the global economy and is a direct result of the massive shift in industry brought on during the industrial revolution.

During the industrial revolution, there was a time of massive transition to new manufacturing processes in developed countries, which led to a boom in what we now know as the Secondary sector of economy.

Why did the world economy shift from manufacturing to services?

As certain jobs became obsolete, automation led to the creation of new jobs that called for different skills; the service functions of distribution, management, finance, and sales became more important.

Combined with the growing rate of expansion in technology, and eventually computers, the world saw a massive surge in interest in the Service Sector.

In the early 21st century, service industries accounted for more than three-fifths of the global GDP and employed more than one-third of the labor force worldwide.

What challenges does the Professional Services industry face?

Service providers started to face obstacles that manufacturers rarely faced - one of those obstacles being: value.

Since services do not produce a tangible commodity, customers struggle to understand what they would receive and the value it would bring them. And, even more to the point, how does one attribute a monetary value to a service one can provide.

Service companies are people based, and the quality of the service is dependent on the quality of the individual providing the service; therefore, the cost of doing business shifted from the cost of goods to the cost of having the right people.

Because of this, service providers often face an unrelenting pattern of increasing costs; whereas, within manufacturing, the use of technology and automation actually lowered the cost of goods sold.

How can Professional Services companies differentiate themselves?

Changes in the economy brought a unique challenge to PS companies, and that was Product Differentiation. What would set them apart from their competitors?

Charging a premium for services is usually an option only for the most established firms, but a necessity for any company looking to provide a quality service.

With competition comes the need to innovate. And although innovating is never easy, at least within the manufacturing sector innovations led to the advancements that helped those companies save significant time and money in the long run.

Competition in the service sector, on the other hand, also presents PS companies with the need to innovate, but for them that task is significantly more challenging.

A PS company’s main focus is meeting their targets on billable hours; it's not surprising that there would be resistance to the idea of pulling resources to refocus on non-billable work.

Even the fee earners of these companies would resist these changes, if enacted, because of the stress of being penalized for not reaching their yearly quotas.

A lot of industries within the service sector encourage stability and discourage innovation; that’s why the little innovation that has occurred has typically been driven by external regulatory changes, direct client pressure, or advances in technology rather than proactive change within the industry itself.

Why does the Professional Services industry need to be innovative?

Competition within the industry pushed Professional Services companies to innovate, which became a huge challenge because innovation opposed the business model, and nature and history of the industry.

The Codexx Associates 2013 study found that the top five challenges faced by Professional Services firms regarding innovation were:

  • Motivation for employees to innovate
  • No or Poor innovation processes
  • Hostile Culture to innovation
  • Insufficient budget and resources
  • Poor client understanding
     

To solve this problem, it’s important to motivate your employees to be more innovative by: 

  • Restructuring bonuses to allow more flexibility around innovative projects.
  • Bringing in external sources to educate your team on innovation processes.
  • Having clients join in on the development and education of a new product/service.

New ideas come from clients or from an insight gained into a client’s business. This is why deep understanding of and education on clients’ businesses is key to effective product/service innovation.

What solutions should Professional Services companies consider to solve these challenges?

While a lot of these issues stem from lack of financial resources, a company can still manage their budget and resources in order to grow.

How, you ask?

With modern advancements in technology, of course. 

The introduction of resource management tools, and eventually enterprise cloud software, like NetSuite and Mavenlink, has helped countless companies within the services sector grow their business.

Today the Professional Services industry represents $3.5 trillion of GDP in developed countries which is about 4% of all economic productivity.

But with an explosion of technology, and an accelerated need for digital transformation, emphasized by the global pandemic, today’s environment requires systems that are much more robust and that focus on the core of what made the professional services industry unique and valued in the first place: the people.

Focusing on your roots and learning to efficiently manage the people that make up your team is the key to succeeding in today’s market.