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Professional Services on the Brink of Disruption: Delivering Nonlinear Growth Through Digitization
Dear Customers and Partners,
The largest taxi company has no taxis, the largest hotel network has no hotels –these are real examples outside our industry where digitization has transformed the industry and is disrupting business models of incumbent players. Translate digitization to the professional services world, where talent is the asset –can we imagine a professional services firm that does not employ any talent? This futuristic view is closer than we think. By the end of 2017, nearly 45% of the world's total workforce will be comprised of contingent workers.1
The key questions that professional services firms embarking on a digital journey need to address are:
• How is this trend and how are other digital forces impacting the professional services industry?
• Is the industry on the brink of disruption?
Professional services firms have long focused on linear growth and now need to break the linear dependency of revenue growth to headcount growth.
Digitization will break this, changing the underlying economics of service delivery, thereby changing the rules of the game for incumbents and opening the door for new competition and new business models.
The old and simple business model –where firms provided highly skilled professionals to clients, charged them out on a time basis, and the difference between the fees earned and the salary and overhead costs provided the profit –will not survive.
Business models will become: outcome-based engagements as opposed to monetizing the effort involved, knowledge-as-a-servicedelivery models requiring firms to provide affordable lifecycle services, and open talent networks,tapping into infinite capacity to source work through talent networks.
To better understand the industry disruption and business model changes driven by digitization, we see four key areas being impacted by digitization and transforming the industry:
• Digitization of expertise lets clients access digitized knowledge and experience structured in a way that they can find it, understand it, use it instantly, and pay for it on a usage or outcome basis
• Digitization of talent is creating value by aggregating and integrating services from various providers into complete solutions that deliver value to their clients
• Digitization of service execution leverages technology to automate and scale previously people-intensive services as well as create entirely new services which were not even possible before
• Digitization of customer engagement will be impacted by B2C principles, consumerizing the way we acquire and transact with customers, driving self-service scenarios and automation of the front end.
The above digital transformational areas will not only impact business models in the professional services industries, but also business processes that need to adapt to this new reality to be agile and responsive to customer needs.
The new digital reality will change the economics of service delivery. Democratization of information and transparency will shift the balance of power more and more to the customer and allow new entrants into the market.
Disruption is real and requires professional services to adapt to the new reality.
This document offers our deeper perspective on digital transformation in the industry and how SAP can support your firm’s digital journey.
I thank you for your interest and look forward to working together to make your firm successful in delivering client value profitably in a digital world.
Eric van Rossum
Global Vice President Professional Services Business Solutions
1. Ardent Partners & Fieldglass: "The State of Contingent Workforce Management" Christopher J. Dwyer, Ardent Partners http://www.fieldglass.com/releases/2015_01_15/ Fieldglass_2015TrendsWebinar_v8_2.pdf
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