With the larger market reviewed, let’s look at the services market specifically.
According to the 2023 edition of Service Performance Insight’s (SPI) annual Professional Services Maturity Benchmarkreport, which analyzes the performance of over 700 professional services businesses, IT consultancies – both independent professional services organizations (PSOs) and embedded services organizations (ESOs) – have held steady in terms of sustaining growth and delivering profits.
Almost all key performance indicators (KPIs) associated with service delivery decreased in 2022. These include average employee billable utilization and project margins falling below their five-year averages, the number of projects delivered on time dipping by 5%, and project overruns increasing by 21%. The report states, “Services delivery is where profit is made in professional services. If PSOs cannot improve margins in 2023, it will be difficult to grow in 2024.”
“One might say PSOs worked harder in 2022, but not necessarily smarter,” states the SPI report. “The fact that many performance metrics deteriorated, albeit in a minor way, serves as a warning bell to PS executives. The market continues to evolve, and the focus in 2023 must return to improved project and services delivery.”
Why do we care?
It’s that closing statement I wanted to latch onto and connect to the previous story. Conditions aren’t poor, but they aren’t great, and that reduces the margin of error. Thus, focusing on improved project and service delivery ensures that a mistake isn’t costly in a climate where that margin of error is reduced. And that’s the critical insight.