What will the professional services industry look like in 2025?

The professional services industry is in a steady groove. Recent global research from Service Performance Insight (SPI) found that professional services sector revenue grew by more than 10 percent from 2018-19, while net profit was a respectable 15.2 percent (despite a small year-over-year drop). But companies cannot afford to get complacent, because change is just around the corner.

A growing market will always evolve, and we’re going to see some seismic changes between now and 2025. Let’s take a closer look at some of the trends and influences that will shape the future of professional services, and how organizations must adapt to them to thrive in five years’ time.

1. Service packages will become productized and subscription-based

The good news for professional services organization (PSOs) is that the service sector is continuing to grow year-on-year; its share of the US economy has already reached 80 percent. But market growth means increased competition, and SPI says businesses must look closely at their services pricing and billing models in the next five years to capitalize on new opportunities.

For example, according to SPI’s report, 2020 Professional Services Maturity Benchmark, around 20 percent of sector revenue currently comes from recurring revenue models, and this model will gain momentum between now and 2025 as businesses seek to create more sustainable sources of income following the changes imposed upon the industry by the COVID pandemic. Subscription and managed services contracts will become the preferred way to bill clients as PSOs move to a usage-based consumption model.

By modeling their business this way, organizations will make it easier for clients to buy their services. The challenge will be evolving company set-up to manage the multi-element contracts that are secured as a result of this approach.

2. Smart, tech-enabled work will out-prioritize hard work

If a usage-based model is set to become the norm, organizations need to look carefully at where their resources are concentrated. In 2025, industry leaders will understand that the secret is to work smarter, not harder, and onboard transformative technologies to facilitate this transition.

Over the next five years, professional services companies will use technology to reduce the time staff spend on administrative tasks, scheduling meetings, entering data, and manually analyzing performance. Innovations in the cloud, business intelligence (BI) and artificial intelligence (AI) will be central to this shift – particularly platforms and applications with a user-friendly interface and the capacity to automate rote tasks efficiently and accurately, eliminating the need for manual intervention for anything other than exception handling.

More importantly, with basic administration taken care of, technology will empower staff to work together towards common goals. SPI research shows that only five percent of PSOs are currently working in an “optimized”, collaborative model; this will increase dramatically by 2025, as companies give people the tools to focus on meaningful business improvements, impactful transformation and change management.

3. People power will remain central to success

One of the common misconceptions about innovation in professional services and the future of business in general is that machine power will replace manpower in the next 5-10 years. As I’ve already mentioned, technology has an important role to play in automating and streamlining low-value tasks. However, this will energize staff and allow them to focus on higher-value, higher-skilled activities.

In the 2020 benchmarking study, headcount growth increased by nine percent; this story of machine empowering man will continue in the next five years. With sophisticated software-as-a-service (XaaS) solutions in place to enhance business insights and strategies, companies will look to recruit new skillsets, and create a compelling vision of their future through which to attract top talent.

Technology may well eliminate non-revenue-producing positions, resulting in a higher percentage of billable employees by 2025. To make sure these people are ‘the best of the best’, organizations will need to offer them benefits beyond salary, and continually nurture their progression. SPI research has found that the average time to recruit and ramp new employees has risen to 121 days year-over-year, so retention is critical to future business success.

4. The young workforce will drive company culture

Today, the professional services sector is a maturing man’s world, with the benchmarking study revealing that the average employee is a 39-year-old male. However, a lot can happen in five years – especially as younger generations scale the career ladder.

Millennials and their successors, Generation Z, have fresh energy and ideas, and they also have a very different attitude to workplace wellbeing – one which professional services organizations must take onboard if they want to recruit and retain young talent.

Measurable effort and output are significant to this demographic, and the ethical and social credentials of a company are fundamental to millennials; reputation means more than just profitability.

These values will dominate the workplace by 2025, and companies must embrace change now to create the millennial-friendly environment of the future. In five years, young professionals will want to put 100 percent of their effort into their job, knowing their contribution is making a difference to overall goals, and still leave on time.

5. Managing change and making sense of the complexities in professional service industry trends

We are already seeing metrics like productivity, engagement and collaboration gather momentum in professional services, and the blending of technology and talent will ensure they become the overarching industry ethos in the next 5-10 years.

By 2025, employees don’t want to be bothered by operations and admin; they want to focus entirely on their role, knowing the back-office supports their demands. Digital solutions should take care of the mundane – whether that’s capacity planning, travel logistics or communications – to ensure minimum effort is needed to do their best individually and to work closely with colleagues. 

One thing that won’t change in the next five years is the need for people; professional services is an employee-driven market, and people need insights to drive their performance. The difference is that more and more organizations will invest in the tools that make sense of complexities to both empower talent to do more effective and high value work, and to deliver better results for their clients.