Professional Service Industry Logs Highest Net Profits Since 2007, Rebounding to Historic Highs, Research Reveals

SAN FRANCISCO--(BUSINESS WIRE)--Net profits for technology professional services surged 35 percent in 2012, according to a global study released today.

“As a growing professional services firm, the very detailed information found within the survey has been extremely valuable for benchmarking ourselves and guiding us on what areas of our business require investment for improvement. Thank you for this high quality resource!”

According to Service Performance Insight’s “The 2013 Professional Services Maturity™ Benchmark,” the professional service industry saw average net profit for the sector increase to 18.3 percent from 13.5 percent in 2011. Embedded service organizations (within software, SaaS and hardware companies) were the biggest winners as their margin climbed to 23 percent from 17 percent last year. Independent PS organizations saw their profits grow to 15.6 percent versus 10.6 percent the preceding year.

A strong recovery for the professional service sector began in 2010 and accelerated in 2012. This year’s highlights include:

Revenue growth: the leading indicators for growth — annual revenue growth, headcount increases and size of the deal pipeline— were all up in 2012, recovering to the pre-recessions highs seen in 2007. Year-over-year revenue growth (11.5 percent) has consistently outpaced year-over-year headcount growth (8.9 percent), which means PSOs are continuing to ratchet up productivity.

Increase in bill rates: Professional service organizations saw an increase in rates with embedded organizations commanding a significant premium over independent consultancies. The surge in bill rates of up to 20 percent combined with higher consultant productivity explains the dramatic jump in net profit.

Productivity continues to improve: The percentage of billable staff compared to total staff has risen every year from 67 percent in 2007 to 75 percent in 2012. At the same time, average billable utilization has increased to over 70 percent, up from 65 percent in 2008.

PSO’s are keenly interested in this benchmark report for insights into normally confidential information such as detailed bill rates and compensation by role, industry and geography. The 211-page report analyzes 196 key performance metrics and includes 268 insightful charts and graphs. Income statements and expense ratios are described for eight PS vertical markets such as advertising/marketing, architecture/engineering, IT consulting, management consulting and software, SaaS and network consulting.

Service Performance Insight’s annual benchmark draws on a database of 1,100 PS organizations, making it one of the world’s most in-depth studies of PS metrics and performance. The 2013 report is based on input from 234 companies representing over 50,000 consultants worldwide. SPI sells the report for $995, it can be purchased here.

The report was sponsored by leading corporations including FinancialForce.com, Intacct, PS Journal, Microsoft, NetSuite, Projector PSA and SAP.

Below are comments from independent organizations that previewed the report:

“Once again, you’ve provided a great resource to the industry. The maturity model and benchmark report have provided us a roadmap for improvements and influenced the KPIs we now measure; it’s also been instrumental to internally communicating our performance relative to the industry. Since we began benchmarking ourselves in 2010, we’ve averaged over 22% annual revenue growth and an amazing 92% annual growth in margin. You are heroes for making us heroes!”
Darin Byrne
Sr. Director, Professional Services
www.WoltersKluwerFS.com

“I have reviewed this year’s PS Maturity™ benchmark. Again, you have raised the bar. This year’s report is an encyclopedia of the state of the PS industry, what differentiates the leaders from the middle of the pack, and methods and investments that can be undertaken to achieve best of breed PS status. There are a variety of paths to PS success, and you provide a roadmap that delineates alternative paths. Congratulations!”
Mike Alsup
Sr. Vice President
Gimmal

“The PS Maturity™ benchmark is a core input to our business planning process. It allows us to understand and explain the trends within our industry and provides us with the credibility to set the right KPIs and annual targets. Most benchmark reports only scratch the surface - the SPI report drills down and slices the data to allow a deep understanding of the most important levers in our PS business.”
Michael Stamler
Vice President, Global Customer Services
North Plains

“As a growing professional services firm, the very detailed information found within the survey has been extremely valuable for benchmarking ourselves and guiding us on what areas of our business require investment for improvement. Thank you for this high quality resource!”
Marco Formaggio
Managing Director
BluLeader Pty Ltd
North Sydney, Australia

Service Performance Insight is a global research, consulting and training organization dedicated to helping professional service organizations make quantum improvements in productivity and profit. In 2007, SPI developed the PS Maturity Model™ as a strategic planning and management framework. It is now the industry-leading performance improvement tool used by over 6,000 service and project-oriented organizations to chart their course to service excellence.