SPI Research Releases 2014 Professional Services Industry Benchmark Survey
Each year, SPI publishes their Professional Services Maturity Benchmark Study, which collects key performance-related data from hundreds of professional services firms in order to benchmark how the top firms are performing, so that organizations can understand what attributes set them apart from their peers and improve their own performance.
The 2014 report was just released, and includes 198 benchmark statistics from 238 professional services firms across 8 vertical markets, such as Architecture/Engineering firms, IT consulting firms, management consultants, etc…
Since SAGlobal’s core focus is providing Microsoft Dynamics AX ERP solutions and services to professional services organizations, we’ve been following the research from Service Performance Insight for a number of years now. Service Performance Insight, also known as SPI Research, is a management consulting firm providing research, consulting and training services that help professional services organizations improve their overall business performance to maximize profitability.
The findings of this year’s study are quite interesting. According to the study, 2013 was a fairly tough year for professional services firms. All major metrics that SPI tracks, such as bill rates, utilization and revenue per consultant fell in 2013. Most importantly, professional services firms saw their average net profit fall to 11.4%, down from 16.8% in 2012.
Some of the other highlights from this year’s benchmark survey include:
Slowing revenue growth.
The leading indicators for growth — annual revenue growth, headcount increases, size of the deal pipeline and backlog — all fell to the lowest levels since 2009. Year-over-year revenue growth slowed from the previous year’s 11.5 to 10 percent in 2013.
Declining bill rates.
Professional services firms saw bill rates fall significantly, with embedded cloud, hardware and IT consultancies dragging down average prices. Bill rates for certain vertical markets such as Marketing/Communication and Management Consulting actually increased reflecting the strong demand for social, strategy and specialized business process consulting.
Too much overhead.
Because many professional services firms added management overhead in anticipation of growth that didn’t materialize, the percentage of billable staff compared to total staff fell for the first time since 2009. This excessive non-billable staff combined with declining bill rates resulted in the lowest annual revenue per person since 2007 at $155,000. This low employee revenue yield led to net losses for 10 percent of firms.
Services as loss leaders.
Consulting arms within SaaS software companies were hardest hit as their net profit margin fell from 24.9% in 2012 to only 4.5% in 2013. Embedded SaaS PS organizations are in the midst of a business model shift focusing on customer adoption and renewal revenue, and using professional services as a loss leader to get there.
More About the Maturity Model Benchmark Survey
The annual benchmark from Service Performance Insight draws on a database of 1,500 PS organizations providing in-depth analysis of PS metrics and performance. 238 companies representing more than 60,000 consultants worldwide provided input for the 2014 report.
The 180-page report analyzes 198 key performance metrics and includes 227 supporting charts and graphs. It describes income statements and expense ratios for eight PS vertical markets such as advertising/marketing, architecture/engineering, IT consulting, management consulting, software, SaaS and hardware and network consulting.
You can purchase the full report for $995 from SPI’s website at www.spiresearch.com.
For more information on Microsoft Dynamics AX ERP for Service Industries, please visit our site www.saglobal.com
About the Author
Vikram Franklin is Group Marketing Manager for sa.global, where his role is to guide organization wide marketing for Microsoft Dynamics products and services. Vikram has over 16 years of marketing enterprise software products and solutions and over 10 years of experience in marketing Microsoft Dynamics solutions and services.