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Increasing Resilience, Profitability, and Sustainability in the Professional Services Industry – Futurum Tech Podcast The Intelligent Enterprise Industry Series
by Daniel Newman | October 23, 2020

This episode of the Futurum Tech Podcast – Interview Series is the fifth installment of our Intelligent Enterprise Industry Series — done in partnership with SAP. Be sure to check out the other episodes to hear the insights from other industry execs. On this episode, I welcomed Craig Quantz and Stuart Harris, two executive advisors for the professional services industry at SAP to discuss how they are focusing on furthering their intelligent enterprise story.

The Interconnected Professional Services Firm

SAP recently partnered with Oxford Economics to conduct a research study to identify how an interconnected mindset impacts organizations including how COVID-19 has upended professional services firms and how organizations are finding ways to work at peak efficiencies in spite of the turmoil. The report includes findings from 3,000 senior executives, including 300 from the professional services sector.

My conversation with Craig and Stuart revolved around the following:

  • How organizations are shifting to digital services and virtual firms as a result of the pandemic.
  • The new strategies firms are pursuing including outcome based engagements, leveraging talent networks, knowledge as a service subscriptions and others.
  • Which strategy has been the most successful thus far.
  • An exploration into why the professional services industry is the least connected industry

Craig, Stuart and I explored some of the findings of the Oxford Economics report: The Interconnected Professional Services Firm, but we only scratched the surface. If you’re interested in a comprehensive view of the subject download The Oxford Economics report on the Interconnected professional services sector here.

Listen to my interview with Stuart and Craig here:

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Read more analysis from Futurum Research:

Increasing Resilience, Profitability, And Sustainability In The Retail Industry 

Increasing Resilience, Profitability, And Sustainability In The Oil And Gas Industry 

Increasing Resilience, Profitability, And Sustainability In The Industrial Manufacturing Industry

Transcript:

Daniel Newman: Welcome to the Futurum Tech Podcast. I’m your host today, Daniel Newman, Principle Analyst and Founding Partner at Futurum Research. I am very excited about this Futurum Tech Podcast Interview Series with SAP, talking intelligent enterprise, having a discussion about a really interesting survey from Oxford Economics, and on top of that, before we get started, I also want to remind everybody that this is part of a 10 podcast series. If you check out this podcast that we are doing today with SAP, you will realize on the Futurum Tech Podcast channel, on YouTube, and on Apple, and everywhere else that you can find it, there are going to be nine other podcasts with industries, everything from retail and oil and gas, and automotive. Again, you like that you hear today, please go ahead and check those out.

Anyhow, very interesting times in the professional services business. We had a crazy year, frantic year with everything that’s gone on with COVID. It has changed the landscape of businesses, changed my life. It put me from being on planes 47 weeks a year, or more, at events all over the world, to basically living in my home office on Zoom teams and WebEx calls. It’s also raised a lot of eyebrows, with companies saying, It’s time to transform. It’s time to change our business. It’s time to make big investments,” and the gentlemen that I have on the podcast today, Stuart Harris and Craig Quantz, are intimately involved with this as they are helping lead the business for SAP.

Without further ado, no more from me, at least not for a second. Let me go ahead and introduce our guests. Craig Quantz, Stuart Harris, welcome to the Futurum Tech Podcast Interview Series. How are you gentlemen doing today?

Stuart Harris: Very well Daniel, thank you.

Craig Quantz: Doing great Dan, thanks.

Daniel Newman: Really happy to have you join. This has been a lot of fun, doing all these podcasts. Getting to meet so many of these folks at SAP, leading different businesses. Having your finger on the pulse of what’s going on, and in your case, to a lot of industries, because you work with an industry that therefore works with many industries.

Before I ask you all a bunch of questions about transformation, intelligent enterprise, and what’s going on, how about an introduction. Craig, I’ll let you go first.

Craig Quantz: Sure. This is Craig Quantz. I’m an industry advisor with SAP, covering the professional services, which in SAP is quite a broad industry including a lot of business services firms. I’ve been with SAP for about five years now, but I spent my entire career in professional services, so it’s an excellent platform to work with pro serve firms throughout North America, and enjoying it. Stuart?

Stuart Harris: Thanks Craig, so this is Stuart Harris. I am, like Craig, I’m an industry advisor for professional services industry, and I cover, focused and based in Atlanta, Georgia, and I focus on the east coast. My background is a bit of a hybrid background. I started my career with Price Waterhouse as an auditor, so I started professional services industry, and back when there was the Big 8, back in the 80s, and just evolved my career with technology and software, but I’ve always worked with professional services firms, either for them or selling software to them.

Daniel Newman: Absolutely. Well it’s a very interesting business, professional services consulting. I complained early on in the show about me getting off the road, and if there’s any, ever anybody I’ve met that spends a lot of time on the road, it is the consultants in the professional services space. Having done a few million air miles, I’ve met a few consultants from the big firms over the years and the stories I’ve been told about the time on the road is nothing short of fascinating. You always love those that end up in those cool assignments too, like in Omaha, Nebraska, or Jackson Hole. They’re like, “I was in Jackson Hole every week for three years.” It’s like, “Whoa, nevertheless, beautiful place in the country.”

Gentlemen, I’d love to talk to you a little bit, starting off broad. You heard me frame this thing, talking about COVID-19. Yeah, I’m sure people, to some extent, are probably a little fatigues with the topic, but at the same time you can be fatigued or not fatigues, this has changed the landscape of business. I would love to hear generally speaking, how your industry has been responding to COVID-19. What was the initial take and how are things starting, what direction is it starting to go now? Stuart, I’ll let you kick off.

Stuart Harris: The impact of COVID has been an acceleration of some trends that were already taking place in the industry. We were seeing a lot of the firms, a lot of the clients were transitioning from face to face, work being delivered face to face, on site, to more of digital delivery. COVID has just expedited that. We’ve seen a lot of, in terms of trends, we’re seeing freelancers relying on, not just your employees, but working with remote employees and freelance employees was out there, and that’s been accelerated.

The other component is because you’re working more remotely, professional services firm’s head already been embracing some remote work, and leveraging those tools, but COVID just accelerated it. There’s also an enhanced, heightened focus if you will, on making sure these employees that are working remote are being, have the tools they need. They’re motivated, they feel connected, so they can deliver that level of client, that work that satisfies the client’s expectations.

Daniel Newman: Yeah, I have to imagine there’s been a ton of investment in tools for the pro services industry. Of course, asynchronous collaboration, that all existed, but the adoption rate, the amount of utilization of all those tools has to have picked up in a big way, because these projects need to go forward, even if people aren’t on site. That can’t stop businesses’ transformations.

Craig, I know in our offline, we had a chance to exchange some thoughts ahead of this podcast, and I asked about the trends that professional services face. You noted a few as well. I’d love to hear you jump in.

Craig Quantz: Yeah, and as Stuart mentioned, a lot of the basic trends in the industry existed before COVID. If anything, COVID is accelerating those trends. Three that we run into most often are a sheet from a traditional materials base. I provide you some time, you give me money for that time, to more outcome based. Really, clients are becoming more sophisticated and looking to have more of a partnership with their service providers. To do that, it’s really tied to the outcome or the results they’re provided by that service.

The other, a second one that really comes to mind, that we run into more and more often now is knowledge is a service. Really, that is digitalizing the knowledge and intelligence that the service provider has, providing it in effect in a product, a software product. It was really pioneered back in early 2000s. I think Mackenzie was really the first to go down this direction. It’s really something that almost every service provider is doing now, for both purposes of having a non-linear or accelerated growth, and also to have a continuous touch point with their clients, which was the original reason Mackenzie did it. It brings a lot of challenges into the service business, because basically it brings a lot of product requirements in, so product lifecycle management, product management, even eCommerce, etc. Things that really didn’t exist in the services world.

The third one, and Stuart already talked about this a little bit, is really the talent. The talent platforms, the talent networks, a continuing move toward using contingent or gig workers to provide the services. That’s something that, if I look across all three of those, really COVID has really accelerated the trends toward that for obvious reasons.

Now, COVID has also come with its own focus in terms of health and wellness, the remote workforce, and the acceleration of the use of remote technology, as well as different go to market models. That sales and marketing is becoming a little bit more formalized, because people don’t have the opportunity to do the face to face, personal sell.

Daniel Newman: Yeah, absolutely. In that Oxford Economic Study there’s a number of links that look at some of the key areas, the prioritization, things you mentioned about the culture of businesses and driving transformation. Our studies too, at Futurum, we found the same thing. We’re finding certain technologies are accelerating faster, cloud, analytics, security have all seen a real big growth.

You mentioned something too, when you just talked about talent. Companies right now are competing to get the best talent to try to keep their talent with them during this very difficult time. People are more uncertain than ever before, and so their ears are perked, and they’re listening for opportunities. They want that stability. They want to be able to put those opportunities to good use.

Let me ask you guys a question there, and Craig, I’ll let you keep on that, where you were going there. To respond to these pressures, you’ve got to shift to digital services. You’ve got firms being able to function with lower costs, almost entirely virtually. You’ve got this whole trend that we keep hearing about, the experience economy. You’ve got disruption coming from new consulting [inaudible] all over the place. How are the pro services companies responding to this?

Craig Quantz: Yeah, I think you mentioned an interesting one there too. In this economy, finding those three basic trends that we talked about, really is an increased emphasis on the experience. That’s customer experience, employee experience, and frankly when you get into the digital services, it’s [inaudible] as well. That has just exploded, and the demand since COVID, in the last six months, the demand that I’ve seen with talking with clients, for real experienced management systems, sophisticated experienced management systems, is incredible.

The Oxford Study, these trends we see, Stuart and I talked with clients, with our clients in the marketplace, those were the top three that came out of the Oxford. The importance of the experience management is also something that the report confirmed. I’ll make one more comment, and that is just in terms of the talent, to pick on that example, we have talent. We have remote workforces. As remote workforces become more of a norm, that really opens up the talent base. Now, if you can have a remote worker that doesn’t need to be tied to the office or the locale, etc, they don’t have to work in the Bay area. They can work in Tennessee. Well frankly, they can also work in Nigeria, or Dubai. You’ve got a world based talent to work from when you start moving more and more toward this remote work model.

Daniel Newman: Yeah, it’s so interesting that you said that, because for years, and I’ve written seven books on digital transformation and future of work, and for years I’ve been saying, “We will enter this economy where companies will want the best talent, no matter where they’re located.” While this happened in what I would say in isolated pockets, it really didn’t scale quite as quickly as you would have thought. That was mostly because I think companies saw flexible work as opportunistic, but not as something that could replace productivity at any sort of full scale.

I think, as you talked, and Stuart, you refer to this, the acceleration of transformation, one of the things that this did prove, not to all companies, because some companies it may be hasn’t worked, but to many companies is that a fully remote workforce could actually yield a similar or greater level of productivity. Anecdotally speaking, I can tell you guys one thing, I’ve worked way more from home than I ever worked. Even all the hours I traveled, I said, “I have no down time.” I said, “I used to get on the plane,” and I’d have an hour of no Wifi or I just wouldn’t buy the Wifi. I’d have four hours in the middle of a day, and I wouldn’t be connected. Maybe you’d work a little bit, but I’m saying now it’s almost as if from the moment you wake up, your home is your office. Every time your phone rings or beeps, it’s something you want to respond to quickly. Your office is right there. We’ve got these always connected devices, PCs, fully outfitted home offices. There is no longer any disconnect from work for a lot of knowledge worker roles.

For pro services, this is probably good. You know productivity is a big part of that business, getting more out of every employee. That’s an ambition. Of course, you want to do it ethically, and you want to do it in a way that’s humane, but people are working more. I think the data has overwhelmingly shown that. Stuart, I don’t know if you have anything to add onto that. I know we touched on talent, because I know we touched on talent.

There’s one thing I saw in the notes, was I was reviewing in advance, that these companies are focused on, and I’d love to get your take on, is outcome based engagement. I’ve heard more and more about these new markers for success being results instead of just time. Is that happening more, and has this shift in the economy and the pandemic driven that to be a bigger request more often from clients?

Stuart Harris: Yeah, we’re seeing that trend has been accelerated with COVID, and it’s very interesting. I did a refinance on my house a couple weeks ago, what traditionally I’d done in the past, where I’d go to the attorney’s office, the real estate broker’s office. Sit down, sit in the meeting, sign the documents, sign multiple copies of the document. All of that, that process, when I refied two weeks ago, it was completely done remote. I did it electronically. I signed once. The documents were done. That was it. What’s the effort involved to do a closing, how much time was involved? Now it’s minimal, but they’re still charging $400.00 I guess, for a closing here in Atlanta.

What’s interesting is, that’s just a sample of, it’s not how much time it takes to get something done, it’s how easy was it? Did you get the result you were expected, and that’s a simple analogy, but that’s what clients are looking for, and we’re seeing.  The Oxford Economic Report references this, but there’s a pressure now for firms because of focusing on not what’s your billable rate times the hours that you worked, but more so what’s the outcome you delivered. There’s a need to make sure that your systems are integrated, and that you’re taking advantage of all the technology advances to do things as fast as possible, and also leverage past experiences.

When you’re looking at outcome based engagements, when you’re competing for work, and you’ve got to be able to do a bid for that client, you really need to understand what your cost is going to be, and you need to have the systems in place to know what it’s going to be, and then also to be able to execute it within the cost you expected, to maintain your margins. More and more clients are relying on the outcome delivered, the results delivered. Also, what you mentioned earlier, about just being remote, because you’re not in the client’s office delivering the service or working in their office, they really don’t know how long it takes you to do something. They’re comfortable with the fact that you’re not in front of them now, and again, as long as they get the result they’re looking for, that’s where their focus is.

Daniel Newman: I think that makes a lot of sense. By the way, I love your story on the refi. Obviously, it’s not your work per se, but I actually was so impressed when I saw the way Quicken did Rocket, and how efficient that was. I invested in the company. I just thought it was like, “This is the way it has got to be.” Why does it take four months when you can do this.

Stuart Harris: Yeah.

Daniel Newman: I’m thinking that’s got to be the ways these companies are thinking, template based, transformational activities, using successes from similar industries, practices, deployments. Kind of like deployments on the Cloud with orchestration, deployments for software services, using template based offerings. That’s got to be something these firms are doing at scale to drive bigger returns, investor outcomes.

Stuart Harris: Huge opportunity and movement, and just with legal firms. A lot of their work can just be done, it can be templatized. They can charge a flat rate for it. They can deliver the outcome that client expects, and they can just do it through technology, maybe robotics in some way. Things are really, really going, or really changing because of COVID, and doing work remotely, and just focusing on the outcome that’s delivered.

Daniel Newman: I hope the change becomes not just about COVID, but about really identifying what’s best, and saying, “Why didn’t we do this all along?” The catalyst is always something, right? It’s always something. It’s always a disruption. The mobile device was a great example of a disruption that changed everything. That’s the Uber to the taxi, or the Smart device, the camera to the Kodak film. We’re going to see it. In this case it was how dynamic is your workforce? How fast can the workforce move? Clearly, it can move faster, so let’s round this off here. I really appreciate the insight. It’s a great job from both of you. It’s always one of those things. Coming on, I get to do this all the time. You get thrown in the fire, so I really appreciate you sharing the real world experience that you have.

Let’s prioritize this. We talked about several strategies. We talked about outcome based. We talked about talent networks. We talked about knowledge as a service and subscriptions that pro services companies are offering at scale. We talked about this experience, led experience management. So many different types of responses are becoming the new means to better business for pro serve companies.

Craig, which ones are you seeing win the day? Of course, you probably could argue all of them, but are one or two of them really sticking out as a new lead, or a route to faster successes for these clients of yours?

Craig Quantz: No, I think obviously it varies by firm. Every firm is in a different situation, and some things are going to be more important than others, in terms of their strategic priorities, but as an industry, I don’t think there is a dominant one. Clearly again, that Oxford Study confirms that. If we talked about those three major trends and the importance of experience management, and the study came out, those were the top. They were pretty close together, so it means that all are important to the industry, and to the success of the industry.

One thing I will point out though is that all three of those, and Stuart alluded to this earlier, is all three of those really require a higher level of integration, both internally and externally, in data sharing, etc., to make those things happen with your customers. One thing that was interesting, to me, when I looked at the Oxford Report, that I just didn’t realize was of the 10 industries that were addressed in that study, pro serv is actually last in terms of the current integration capabilities, which was a little bit of a surprise to me, and a little bit of a challenge for our industry to come out and do that.

I think there’s always value in looking at where other industries are. You mentioned there’s nine other of these podcasts for different industries. I would encourage you professional serv folks to look at some of those. There’s always, “Hey, what’s similar? What’s, where are new ideas?” I think in terms of the priorities, it’s all about the same, but what it means is there are changes. It’s not just changes to processes. It’s really changes to people and mindsets too, for how these things work. I think that’s probably the biggest tip to our industry is to get the mindset around these new ways of doing business, these new models.

Daniel Newman: That’s fascinating. I would not have expected it, but the study did indeed say that the industry’s somewhat behind. You’ve got to wonder if it’s, what do they always say about the cobbler’s kid, has no shoes. The industry is clearly on the front end of technology. Pro serv, I mean it’s often the companies that are turned to by the large enterprises in the world to advise, to lead, to support the deployments of these modernized tech. It is sometimes interesting how you keep on top of all those things concurrently, especially when you’re working usually with dozens, if not hundreds of different vendors in competing spaces, to always make sure you can offer best in class. Craig, looks like you want to weigh in.

Craig Quantz: I think some of that is just the legacy of the industry. A lot of professional services firms operate in somewhat in federated models, so they work, whether geographically federated or federated along their service lines. It’s really that balance between efficiency and agility. Pro serv is always oriented toward agility, to respond to the market, to be the trusted etc. Some of that’s been that trade off. I think that’s where you’ve seen some of the integration. As we see this new world, the integration is absolutely essential, and they’re starting to address it.

The last comment is you did make a comment in terms of pro serve is often out in front in some technologies. The study said that really pro serve is a leader in predictive analytics. Leading in some places, lagging in others, and that’s really, it’s just the challenge to our industry.

Daniel Newman: Absolutely, that’s some great insights. I think that’s the right area to be leading. Taking analytics to AI and modeling machine learning is going to be the next big thing. Stuart, love to give you the last word here. You’re out there similarly to Craig, working with these customers. What are you seeing the ProServ, what are they leaning into that they’re getting a lot of return on that effort, investment, and of course I know you may have some of the same thoughts as Craig, so it’s always harder to go second, but we’d just love to get your take before we wrap things up here today.

Stuart Harris: Yeah, the thing that is interesting to me, and we work with a lot of staffing companies. I’ve been working with a few now that they’re just really trying to shift the paradigm on the staffing model, and they’re trying to go from this traditional model to more of an Uber model, where you just deal directly with the consultants. Instead of looking at a staffing company as a service provider, they look at these staffing companies more as a platform provider, where they can go in and just use that platform to find their own engagements, and to work directly with companies.

The other thing that’s interesting from working with some of these firms is that because this proliferation of remote work and outcome based engagements, if you have a lot of expertise, you can now, and you mentioned this a little bit earlier as your old travel model, where you’re traveling a lot but now if you have a lot of expertise, you can service multiple clients in one day. I can be working in my remote office as a, if I have some expertise, and again, I can work on five clients through video conferencing, whatever it might be, and not even have to leave my home. I’m much more productive, and I’m touching more of the clients. I think there’s going to be just a lot of more margin and productivity for people in this new world of being digital services, if you will.

Daniel Newman: Yeah. No, absolutely gentlemen. I want to thank you both very much for your time here on the Futurum Tech Podcast Interview Series. Like I said, a lot of questions, under the microscope, but the industry’s very important. It has been for a long time. The companies that you serve and work with are going to be some of the Bellwether’s for working side by side with companies that we engage, buy, consume, promote every day. Really appreciate what you do, appreciate the insights.

For everyone out there that’s tuning in here, that heard Craig and Stuart talking about this Oxford Economic Study, that would be great if you would hit that link in the show notes, and download it. Check it out. It’s free. There’s no cost. It was a really, really exceptional study with a ton of information in it. I’ve been through it. No matter almost what industry you’re in, there’s going to be relevant data that’s going to help you see how to navigate your intelligent enterprise, and making investments in digital transformation that are critical for your business’ success.

For this episode of Futurum Tech Podcast Interview Series, it’s time for me to say goodbye. I want you to go ahead and hit that subscribe button, join us for all of the podcasts. Check out the other nine as part of this series, or check out any of the other podcasts we have with executives and leaders from across the industry, all the time.

Craig, Stuart, thank you very much for joining me again.

Stuart Harris: Thank you, Daniel. It was fun.

Craig Quantz: Thanks, I appreciate it.

Daniel Newman: With that, we’re out of here. We’ll see you all later. Bye-bye.

 

Daniel Newman