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Professional services firms suffer skills gaps and legacy system issues

Research from Unit4 covering the state of the European market reveals optimism, but concerns about barriers to growth

Cloud software player Unit4 has found that professional services specialists across Europe are experiencing lower growth than they might expect if they were not facing challenges in getting hold of skilled staff and dealing with legacy systems.

The report Professional services in Europe: a benchmark for 2022, commissioned by Unit4 and undertaken by PAC, examined a range of professional service markets, including those delivering IT support, and found there was optimism thanks to increased customer demand.

But there was a feeling that things could be even better if talent was easier to find and if dealing with legacy IT systems, often a consequence of consolidation, was not holding back more innovation.

That skills problem is only going to get worse, with the research revealing that 81% of professional services firms plan to increase their headcounts to support growth.

On one level, the survey findings indicate that those delivering IT services have reasons to be upbeat and it also reminds the channel that those trying to provide consultancy in fields ranging from architecture, engineering, management consulting to financial services could be targets for sales.

“It could be tempting, as optimism returns to the professional services sector, that business leaders choose to avoid addressing the key issues raised in this study,” said Nick Mayes, research director at PAC. “It is more important than ever to have the right strategies in place to sustain growth and operate with the flexibility to adjust to what are still quite volatile market conditions.

“2022 may not quite be a year of ‘consolidate or be consolidated’, but firms should be under no illusion that alongside growing opportunities, market pressures are accelerating.”

Professional service firms in the UK were among the most bullish about their prospects and many expect to see revenues increase in the coming year.

Customers are continuing to drive digital transformation projects, but with those supporting them hampered by skill gaps and legacy systems, the idea that future growth is a given is far from certain.

“Future success in the professional services industry will depend on how innovatively firms can respond to client demands,” said Mark Gibbison, head of strategic motions for new business at Unit4.

“That requires an IT infrastructure built on agile foundations and designed to deliver a single source of information. Firms are also going to have to pay close attention to resource management to avoid talent attrition and maximise repeat revenue from existing customers.”

Key findings

Optimism: 83% of business leaders expect revenue increases in their current fiscal year and 82% also expect their number of accounts to increase.

Growth plans: 50% through acquiring new customers, 40% via mergers and acquisitions and 90% counting on repeat business with existing clients.

85% view decarbonisation requirements as an opportunity for new revenue streams.

Barriers to innovation: 71% face a dependence on legacy applications, 62% suffer a lack of insight into critical performance data and 60% of organisations reported an attrition rate of more than 10%. IT services firms (44%) and management consultancies (42%) have an attrition rate of more than 30%.

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