Zero One: Services Industry Faces Pivotal Moment

If you’re in the services game and not using data to make better business decisions and not leveraging contract talent, then you’re a laggard at risk of falling further behind.

At least this is the major finding in a new report, “2018 State of Services Economy,” from Mavenlink and Research Now. It’s critical for services companies in tech, marketing, and media to take chances and evolve, because a challenging business environment is separating winners from losers.

“This report finds that 2018 is a pivotal moment, one that will, perhaps, define the future of work,” says Mavenlink CEO Ray Grainger. “What once seemed impossible for service organizations is now easy to automate with modern process and technology.”

The undercurrent of the report’s findings is one of pressure. Today’s customers demand higher quality and greater agility from their service providers, Grainger says. Services, in the form of projects, must be delivered swiftly to keep up with the speed of the digital economy.

More and different kinds of companies are also jumping into the services fray. The report surveyed 576 executives in professional services, and four out of five said there’s been an increase in competition. They have to work harder than ever to retain clients and find new ones, while margins get squeezed.

Even the nature of services work is changing.

Three out of four of services organizations are moving to specialized, project-based work, the report says. Most of these projects are one-off deals. This means service providers must offer a variety of specialized services while constantly searching for the next gig.

One-off projects are difficult to staff and turn a profit. They’re a thorn in business growth strategies and risky to do – a bad project can sour relationships. Ironically, the report infers that many of these projects were agreed to for the sole purpose of maintaining the client relationship.

“If it feels like the world is spinning faster, you are not alone,” the report says.

One way out of this mess is to look to industry leaders for guidance.

Services companies that regularly deliver projects on time and within budget and hit growing revenue and margin targets have a couple things in common: They’re more mature in leveraging a liquid workforce and more focused on data to make smarter decisions than their peers.

Given the range of specialized services offered nowadays, it’s paramount for services companies to tap into a liquid workforce – that is, leveraging contractors and sub-providers. In the report, 65 percent of executives said they had to turn down work in the last 12 months because they lacked the resources and skills to pull off the job, up from only 35 percent last year.

Put another way, 81 percent of executives said leveraging a liquid workforce is the agile answer to growing their businesses. It’s an answer, but not necessarily an easy one. Thirty percent of executives said it’s hard to find good contractors.

“In the future, it will be the organizations that are most successful at building and leveraging these talent networks that will emerge as the winners,” the report says.

If you want to know what a winner looks like, check out the balance sheet. More than 90 percent of top performers said margins, revenue and utilization were trending up, while a significant portion of everyone else said margins and utilization were trending down, the report says.

Interestingly, top performers don’t concern themselves so much with growing revenue and margins or even improving client satisfaction. Perhaps they’ve already charted a solid path to them. So, what are they concerned about? The answer to this may provide a little insight into the secret of their success.

Top performers said leveraging data to run their business was a top challenge, according to the report. Data governance and data quality were major areas of focus. Last year, data security and leveraging data were their top two challenges.

By now, you should be sensing a theme – a data-driven one.

Tom Kaneshige writes the Zero One blog covering digital transformation, AI, marketing tech and the Internet of Things for line-of-business executives. He is based in Silicon Valley. You can reach him at [email protected].