2021 benchmark for the consultancy industry: The difference between top and bottom has never been bigger
This year, there is an extra good reason to learn from the experiences from the many consultancies participating in the benchmark. See what separates top form bottom in the 2021 benchmark.
Do you live on selling time, knowledge and expertise Then my guess is your business landscape changed a lot the past year, and that you continuously navigate unknown waters here in 2021.
But luckily, this year’s biggest benchmark of the consultancy industry just arrived.
With the Professional Services Maturity Benchmark you gain insights into key figures from +560 consultancies and see what separates top form bottom.
The benchmark includes about 200 pages. In this article, I point out the 3 tendencies your consultancy should focus on in 2021.
The consultancy industry weathered the storm in 2020, but there is a huge difference between top and bottom
This year, there is an extra good reason to learn from the experiences from the many consultancies participating in the benchmark: The difference between top and bottom in the consultancy industry has never been bigger.
28% of the consultancies in this year’s benchmark report a revenue growth of more than 15%, while 19% report a decline.
So, what separates top from bottom? We’ll get back to that. First: A look back to 2020.
2020: Crisis and accelerator
I don’t think it’s an exaggeration, when I call 2020 a crisis year. We have experienced a health sector under pressure, a significantly challenges business communities, families balancing home schooling, working from home and the loss of social interactions outside of their homes.
No matter which continent you are at, if you live in the big city or the countryside, if you are at your workplace or at home, you are affected by COVID-19.
We’re all connected
Because the World has moved closer to us. We’re all connected. And even though, when it comes to pandemics, it’s a challenge, it’s also part of the solution in my opinion.
When we recognise how closely connected we are, we also realise how much we can learn from each other.
And how fast we can move, once we do so.
While we in Spring 2020 groped in the dark, we are now as society, companies and individuals much wiser.
And we must share this knowledge with each other.
Therefore, I’m extra proud this year that TimeLog together with Service Performance Insight (SPI) can present the yearly Professional Services Maturity Benchmark. With this at hand, you can learn from the experiences and 2020 results from +560 consultancies.
And as this year’s benchmark shows, the consultancies who did best have:
- Found new ways to operate
- Accelerated the digital transformation
- Successfully re-organised their business models lightning fast
In this way, 2020 was both a crisis and an accelerator . And with this, we jump to 2021.
The 3 tendencies to secure success for consultancies in 2021
1. Hybrid companies
In 2020, consultancies had to move from shared offices to home offices. This year’s Professional Services Maturity Benchmark shows that most companies went virtual fast and it was relatively painless for the business. We experienced the same here in TimeLog, as I have mentioned earlier in this article.
See the 6 digital tools that keep my company in business during Corona
Over all for the industry, on-site delivery decreased to 41% (from 57% in 2017), which especially hit the bottom line at IT consultants. On the other hand, consultancies specialised in cloud solutions and analysis experienced close to record high results for both profit and growth in 2020.
Compare the consultancy industry across subject areas and geography in the Professional Services Maturity Benchmark
The crisis increases our productivity
When we dive into the numbers for project quality and employee efficiency, the benchmark shows that both increase when we work from home. At the same time, we saw a little increase in the number of projects delivered on time at that the contribution margin on projects is kept.
Even though working from home combined with home schooling is a huge challenge, there is also a number of benefits for the employees when working from home. Most importantly probably the flexibility.
Therefore, you’ll see more hybrid companies in 2021. Even when you can return full time to the office.
Hybrid companies are defined as the companies where we both work from home and from the office. And there will be more of those in 2021.
One of the larger tech companies that has already moved on this tendency, is the music giant Spotify. Back in February 2021, the company announces that employees can now work from all over the World .
Spotify becomes of the World’s first bigger hybrid companies
2. Digital transformation has accelerated
As tendency #1 showed, most consultancies could move virtual overnight. In line with this, a survey from McKinsey shows that the crisis has pushed companies to accelerate the digital transformation by 3-4 years.
Read the full report from McKinsey on how COVID-19 affects business and technology
Digital transformation has been a hot topic for long, and in 2020 it became clear that we under no circumstances can keep pushing digitalisation and automation in front of us.
If you though you had to be agile before 2020, it’s nothing compared to what is necessary today.
And digitalization, or more specifically, your business systems must support this.
Because, what will you do, when the sales suddenly stall with the same force as we saw in 2020? How long can you wait to make an analysis of what happened or what you need to do?
And how will you get the best answer, when you must seek it across the company’s activities?
It requires integrated business systems, because they provide you with the opportunity to visualise all activities and processes in the company, both across departments and in depth. With this, you gain an overview of which corrective actions you need to complete.
Or in other words: If you only look for profit in your sales pipeline, you quickly run out of options.
You need to keep track of all parts of the business, and not least the internal processes and work procedures. Because the consultancy industry in 2020 obtained a part of the profit from automation and optimisation of processes. The profit would otherwise have gone up in smoke due to missing new sales, as this year’s Professional Services Maturity Benchmark shows.
3. New business models see the light of day
One of the things we can learn from the second tendency is also that vulnerability in your business model can be crucial for your growth. Especially in times of crisis.
So, when did you last give your business models a service check?
In 2020, almost 20% of the revenue in the consultancy industry was generated from a change to recurring revenue, e.g. use based consumption, subscriptions and managed services.
Even though traditional projects based on e.g. time and material are still the most dominating in the consultancy industry, SPI expects the consumption based models to gain further ground.
And that’s not a coincidence.
Today’s (and the future’s) customers have an increased focus on results and a clearly defined ROI on projects, than buying infrastructure and a project.
It must be easy to buy, easy to use and provide a immediate solution.
Download this year’s Professional Services Maturity Benchmark
In this year’s benchmark you can read about:
- Growth, profit and EBITDA
- Revenue per consultant
- Yearly billing rate
You receive the numbers per region and industry, so you can quickly gain an overview of the 2020 status and see what separates the best companies from the rest.
In our SPI package you both receive TimeLog’s Executive Summary and the FULL report (about 200 pages worth 1750 EUR) for free.
What is the Professional Services Maturity Benchmark?
This year’s benchmark based on record-high response rate
It is the 14th time that SPI publish the Professional Services Maturity Benchmark which this year includes data from more than 560 companies. The benchmark is the most comprehensive analysis of the consultancy industry across more than 100 KPIs and includes a presentation of SPI’s maturity model that help companies improve their competitiveness.