Is Digitalization Challenging Professional Services?

Judy Cubiss and Ginger Shimp

The professional services industry has been conducting business pretty much the same way for a long time. Professional services firms acquire talent, train employees into their corporate culture and methodologies, and resell their services after adding a percentage markup. Straightforward and simple, right?

But the times, they are a-changin’.

A recent study by the University of Oxford and Deloitte suggests that by 2035, many employee roles of the services economy will be automated. It predicts that there is a 94% chance that the activities performed by accountants and auditors will be automated. Indeed, several other services jobs, including security guards, call center workers, legal associates, computer programmers, and others are all likely to be automated.

While businesses have always changed with the times, the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving—and the degree to which they transform the way they innovate, operate, and serve customers.

Historically, to increase profits, professional services firms would increase sales and increase staff. While digitalization has affected and even revolutionized other business sectors, the professional services model has remained largely intact.

But that paradigm is changing before our very eyes.

Recently, Brian Fanzo and Daniel Newman, co-hosts of the popular S.M.A.C. Talk (social, mobile, analytics, cloud) Technology podcast, caught up with Eric van Rossum, head of the professional services industry at SAP, on an episode of an extraordinary series entitled Digital Industries, which examines how digital transformation is affecting 16 different industries.

According to van Rossum:

professional services business model is getting challenged

He added that while the service is being delivered by humans, the IP is starting to be embedded in technology that more easily supports outcome-based engagements.

SMAC podcast

Digitalization will challenge professional services firms to rethink internal structures and thereby better deliver services and maximize profits in an increasingly digitalized age. But at the same time, it also will require considering how automation will impact jobs. To complicate this even further, overall the workforce composition is changing, with more and more jobs being staffed from a talent network—contingent workers, freelancers, independent contractors and subcontractors, and SOW-based labor. And while it is typical of professional services firms to hire freelancers and subcontractors to perform part of the work, the emphasis is usually on augmentation rather than primary reliance on external talent to lead the work. Industry experts predict that by the end of 2017, nearly 45% of the world’s total workforce will be comprised of contingent workers.

These are fundamental changes for professional services companies.

Talent management reinvented: Headaches and opportunities

As the IoT, Big Data, and artificial intelligence gel in a digital core, digitalization in the professional services sector is not just likely, but inevitable. Anything that is rule-based and repetitive is a candidate for artificial intelligence and machine learning. Many examples of this type of work can be found in audit divisions of firms. As van Rossum explained, “There’re various degrees to how a function can be automated, and professional services will be hit very hard by that trend in the sense of displacement.”

Beyond the use of digitalized information, professional services will also be challenged by rethinking how, as well as by whom, services are delivered.

If ride-sharing services can transport people without owning vehicles and home-sharing companies can deliver vacations without owning properties, how can service industries deliver quality services with fewer people?

It will be through a growing network of talent pools that will allow companies to resource a talent, or even an entire project, at the time it is needed and at a cost that is desirable. While many of these talent pools started with lower-level skills, today’s talent networks include ever-increasing levels of sophisticated talent. These pools are being fueled by talent that is discovering the joys of working on ever-changing projects on a mobile basis.

With talent barriers minimalized, forward-thinking companies can shed full-time personnel while maintaining, and in many cases, improving quality. It is a challenge for talent managers, but it also makes it easier for these managers to find the specific talent they seek for specific projects. Companies don’t need to make large investments in onboarding full-time employees or provide costly benefits. They can instead focus on targeting talent to match needs and to fit customers. In the S.M.A.C. Talk Live podcast, van Rossum predicted, “We do expect the revenue from these companies are going to be growing, delivering that (growth) with significantly less head count. And we actually think that 50% of the head count for a professional services firm is going to be outside the core boundaries of that company.”

However, companies will still need to ensure that the people in the talent network represent the brand in an appropriate way. So how you manage talent that is increasingly outside your enterprise will play a key role in your success.

Being able to include contingent labor in processes such as onboarding, security, protecting IP, and offboarding will be paramount. It’s no wonder, then, that companies are looking for support to manage talent. “One of the companies SAP acquired a couple years back is called Fieldglass, which actually is a talent network,” van Rossum said. “It is a cloud-based asset, so we actually see the type of jobs which are getting sourced within that network, at what price point, and we definitely see a model where things that were first getting outsourced were repetitive and commodity type of tasks.” He continued, “It’s the more complex jobs, and in some cases even the whole project that is actually getting staffed from an external perspective. The digitized way of working and the digitized way we actually catalog skills really allows for that.”

Consumers have accepted digitalization, and the workforce has embraced it. For those in the professional services sector, now is the time for digitalization. Ride the wave—or risk being swept under.

Transforming into a truly digital business is much more than just implementing new technology to meet the demands of a digital age. It’s more than keeping up with the deluge of transformation happening all around us. Digital transformation is about understanding how to harness these changes and incorporate them into your business strategy. It’s about driving agility, connectivity, analytics, and collaboration to run a Live Business. A digital core empowers you with real-time visibility into all mission critical business processes inside your four walls, and in your interactions with customers, suppliers, workforce, Big Data, and the Internet of Things.

To listen to this episode of Digital Industries for the professional services industry, co-produced by SAP and S.M.A.C. Talk Technology Podcast, click here.

For more on how SAP can help you drive your own digital transformation in the professional services industry, visit us online.

Judy Cubiss

About Judy Cubiss

Judy Cubiss is Global Marketing Lead for Industrial Machinery and Components and Automotive at SAP. She has worked in the software industry for over 20 years in a variety of roles, including consulting, product management, solution management, and content marketing in both Europe and the United States.

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.