The risks and rewards of modernising legacy IT in professional services

While research suggests more positive market conditions ahead for professional services firms, there are also concerns that companies are still too reliant on legacy IT. Bryce Wolf, director for strategic growth in professional services with Unit4, addresses the issue of legacy IT systems and whether professional services firms need to upgrade them.

Professional Services firms had a tough year in 2023. The 2024 Professional Services Maturity Benchmark from global research organisation SPI states that revenue grew by 7.8% globally in 2023, down from 10.4% revenue growth in 2022.

Expectations are better for 2024, and the sector will likely bounce back despite the geopolitical and economic factors taking place worldwide. SPI Research expects revenue growth to return to the 10-12% rate it typically achieves.

However, if they are to thrive, they still have a major IT hurdle to overcome. Legacy IT systems. According to the 2023 PAC report, “over three-quarters (79%) of Professional Services firms view dependence on legacy applications as a primary barrier to driving innovation in their organisations.” This is an increase from the previous year when 71% of those interviewed cited the same response.

Hesitation leads to risk

There are oft cited reasons why professional services firms are slow to move away from legacy systems, but in today’s economic landscape hesitation to transform can be a major risk. With new business opportunities popping up in a more unpredictable way, the firms that react quicker to client needs and with more agility will be more competitive. And more likely to thrive.

Central to being ready for such new opportunities is the move away from legacy systems to the Cloud. It should not just be seen as a technology transformation. It should be seen as a strategic investment plan that will future-proof operations and foster sustainable growth. By building out a detailed transformation plan, Professional Services will not only have the ability to modernise IT systems, but also streamline business processes, with the ambition of achieving a single, cohesive ERP system that underpins the organisation’s business model.

In this transformation, firms can unify key business functions, manage complexity, support continuous change and expansion, as well as accelerate strategic initiatives. Nuclear Restoration Services (previously known as Magnox) moved from a paper-based system to the Unit4 Cloud, their implementation of Unit4 TM, integrated into our ERP suite. This resulted in an engagement survey that saw 75% participation, with around 22,000 comments, a historic high for the organisation.

Similarly, they found that thanks to other capabilities found in the Unit4 Cloud, NRS employees spent 50% less time on performance management. With a new system that is interactive, user-friendly, and promotes joint ownership, managers can easily communicate and request feedback, encouraging active participation.

Assessing the risk

For any Professional Services firm evaluating whether it needs to reduce reliance on legacy systems, much of the calculations come down to exposure to risk. Here are some criteria which Unit4 customers have told us they are using to inform their decision making:

Are you relying on manual processes? If your organisation is still using Excel (don’t worry you’re not alone) and are dependent on manual data entry, there is a significant risk around data integrity. In the age of increasing regulatory compliance and ever-growing volumes of data, can you afford to rely on systems that do not automate key processes?

Are you confident you are managing cyber threats? There is no perfect solution to ever-evolving cybersecurity threats, but legacy systems can make it harder to prevent vulnerabilities. If your applications are on-premises, then you need to manage physical servers which increases costs in contrast to Cloud-based systems where updates are automatic.

Do you have a single view of all the data in your organisation? Legacy systems have been built up over years spread over different silos. This complexity makes it harder to create a coherent view of the information needed to make accurate decisions quickly. In such dynamic market conditions, data silos are not good and a key driver for moving to the Cloud is streamlining your data strategy.

Can you adapt to hybrid working? Particularly for firms who have staff spread across the world, being able to manage the workforce dynamically is key. The rigidity of legacy systems may limit the ability to deploy a team quickly for a new opportunity and provide them with the support they require. Cloud-based applications enable extensibility in real-time to adapt to changing market conditions.

Can you scale quickly? An effective ERP system must possess the capacity to evolve with your business needs without adding significant expense. Scaling on-premises servers is tough as it is based on hardware, not in digital infrastructures like the Cloud. Growth within a legacy system can simply lead to more hardware costs, and the IT personnel costs to maintain them.

What thriving looks like

If a firm can address these points by modernising its core IT systems, there is significant potential to thrive. But what does that look like?

The ultimate goal for Professional Services firms is to deliver exceptional value to their clients while ensuring long-term profitability and growth. A cohesive view of all organisational data enables firms to identify where revenue is expected and understand the planned margin. With scalable IT systems, firms can quickly respond to customer demand by using reference models to spin up new projects efficiently.

Modernising core IT systems also enhances billing accuracy. Automated invoicing captures all billable items and ensures precise calculations. Optimising resource utilisation remains essential, and the right IT systems enable firms to plan staffing effectively, assign resources to projects, and monitor utilisation in real-time.

The result? Firms can execute profitable projects by maintaining a comprehensive view of their data, improving revenue forecasting and recognition. Key performance indicators (KPIs) can be implemented to monitor margin leakage and trigger corrective actions when needed.

While these internal improvements may seem process-focused, they ultimately allow firms to serve their clients better. They can react more swiftly to client needs, ensure that the right expertise is in place to deliver projects successfully, and provide accurate billing to maintain trust. In competitive markets, professionalism and operational excellence are critical, and modernising core ERP systems is integral to achieving this balance between client value and business success.