Deltek Clarity research: State of the consultancy nation

20 July 2023 7 min. read

To understand the state of the professional services industry, Deltek every year conducts market research into trends and developments in the architecture, engineering and consulting industry. Neil Davidson, Group Vice President at Deltek, walks through some of the top findings of the Clarity 2023 report for management and digital consulting firms.

Despite the challenging macroeconomic conditions, the research reveals an overall positive picture for consultancies. Seven in ten (71%) firms say that, compared to 2022, they are expecting to increase profits in 2023.

However, it’s not all sweetness and light, profitability comes with challenges that need to be recognised and addressed. The economic landscape is causing several financial concerns for businesses, including recession (62%), inflation (61%) rise in interest rates (61%) and cyber security risks (63%).

Firms concerned about key issues

In addition to these concerns, there are project management challenges to factor in, plus the scale and effort required when adopting artificial intelligence (51%), developing the right skills and knowledge (49%) and keeping pace with changing client expectations (48%).

With an operational model that supports business needs, it is no surprise that consulting firms are the most likely to be concerned with keeping pace with changing client expectations. In contrast, architecture and engineering firms are most likely to rank the adoption of AI in their top five project management challenges.

Investment in technology is more important than ever before. 74% of the companies surveyed state that they will lose market share within two years if they fail to make progress in digital transformation. That is why it’s no surprise the top priority for firms in 2023 is investing in new technology (45%), followed by expanding into new markets (42%) and attracting new talent (40%).

Top 3 priorities in 2023

And investing in multiple initiatives can help these capabilities to reinforce one another. For example, organisations investing in new technologies often attract and accelerate the hiring of new talent. 

Technology shaping success

Compared to their investments in 2022, over three quarters (79%) of firms plan to invest more in emerging technologies in 2023. With technology innovation skyrocketing in recent years, at least two-fifths said they feel the following are very important to the success of their organisation: data science (43%), big data (42%), robotic process automation (41%) and artificial intelligence (40%).

At present however, only 34% of consulting firms feel ‘very well prepared’ to implement their top priorities for digital transformation. This is likely because investment in technology can sometimes be costly and employee education has a long way to go with new innovations evolving daily.

Emerging technologies and their importance to firms

At Deltek, our recommendation is for consultancies to take proactive action to implement measures that will enable them to feel more prepared. For example, businesses should be looking to foster stronger relationships with digital-oriented teams. These relationships can help bridge the digital transformation gaps, enabling consultancies to develop strategies to deliver digital investments, as a unified team, across the entire organisation.

The importance of people and the planet

Consultancies can also take action through investment in talent – another top priority for 2023. Two thirds (67%) of participants report their organisation is planning to increase the size of its workforce during 2023. However, despite ambitious growth plans, attracting and retaining talent remains one of the top challenges for 40% of respondents.

Employee-related issues, detrimentally affecting the organisation

Positive action is being taken here, as 76% of firms say that they now place more importance on employee mental health and wellbeing than last year.

This significant increase indicates that firms are increasingly transforming their employee engagement and retention focus as a method to engage a diverse pool of candidates and staff. Progress is being made in this area, which is creating a more positive work culture and environment.

However, there is still work to be done, with only 40% of consulting firms having an employee mental health and wellbeing programme strategy, and 39% having a diversity, equity and inclusion (DE&I) strategy. Over the coming year, more firms will need to invest time and resource into creating formal policies to foster a positive, diverse and supportive workplace environment, which will be key to recruiting and retaining top talent.

Percentage of firms that track each KPI

Alongside a renewed focus on the wellbeing of people, consulting’s focus on social responsibility has rapidly increased. 65% of consulting firms place more importance on corporate social responsibility (CSR) and environmental social governance (ESG) now than they did at the start of 2022.

The report also revealed a rise in businesses wanting to become more environmentally sustainable, with over half (57%) planning to only do business with socially responsible companies. In 2023, consulting firms that invest in corporate social responsibility have the opportunity to not only benefit the planet and their people but win more projects.

The potential for growth

Despite the challenges, professional services businesses are still planning to increase profits in 2023. Determined to succeed, companies are exploring numerous strategies to accelerate growth, with reducing expenses topping the list (28%).

Methods of significantly increasing profitability

Most companies also plan to carry out more projects. 35% doing this for the same number of clients and 36% for a greater number of clients. To win this work, the businesses surveyed are planning to work for clients in more stable/lucrative industries (33%), clients who are more socially responsible (33%) and industry-leading clients (31%).

The outlook for the coming year is optimistic. Firms feel confident in addressing the challenges and tackling digital transformation head-on to increase overall profit margins. While the economy may be throwing mixed signals, firms have adjusted to working throughout turbulent economic times, and are now positioned to put their best foot forward – digitally.

As innovation continuously evolves, it’s an exciting time for the consulting industry, with those prioritising technological investment proving their worth and outrunning their competitors.

About the report

Deltek’s Clarity report has been held annually since 2019 across regions including North America, Europe, and Asia Pacific. The 2023 edition of Clarity surveyed more than 1,000 leaders from architecture, engineering and consulting firms worldwide. Deltek is a global provider of software and solution for project-based businesses.