New research published by Deltek has found that professional services businesses are optimistic about growth opportunities and plan to invest significantly in technology to realise their ambitions. In the latest research: Deltek Clarity Trends and Insights for Architecture, Engineering and Consulting Firms, the majority of project-based businesses (84%) expect to increase profits in 2024, compared to 71% saying the same in 2023.

However, on the road to growth, increasing profitability is a top challenge identified for firms’ financial leaders (38%). To address this, leaders also have ambitions to reduce expenses (29%), ensure people register their hours on-time (27%), and increase control of costs (26%).

The main drivers for realising growth targets have been identified as investing more in IT infrastructure and investing more in technology innovation (35%). This investment is seen as crucial, with 67% of firms stating they will lose market share within two years if they fail to make significant progress in digital transformation. This tallies with an appetite to embrace new technology, as 79% of firms expect to increase investment in emerging technologies compared to last year; with 29% planning to invest significantly more.

Artificial intelligence (AI) is a top technology being rolled out in professional services firms. The research revealed that nearly all firms (98%) are leveraging traditional AI/machine learning (ML) and 97% claim to be using generative AI. The hope for AI as a transformative technology is high, with 74% of firms confident that investing in AI will expand the services it can deliver to the market and 41% believe that successful implementation will increase profits. As a result, around three-quarters believe that investing in, and successfully implementing AI, will give them a significant competitive advantage (74%). However, firms feel the need to act fast, with over two-thirds (75%) of firms stating they are extremely/somewhat concerned about competitors implementing tech faster.

Futurist and strategic business and technology advisor, Bernard Marr, cautions against rushing into AI investments, “In addition to the findings from Deltek highlighting the appetite to implement AI and the pressures to do so fast and gain first mover advantage, firms must not take a scattergun approach to their AI investment and sign up to the next new craze. It’s vital to set objectives and benchmarks to identify where new technologies will really move the needle. With the rate of evolution in the AI space, businesses could, in theory, be updating their strategies almost every week to incorporate new solutions. The key is to understand where inefficiencies are, where technology can aid people in their jobs to streamline operations, and frequently review the effectiveness of solutions against objectives and what is new in the market.”

Project complexity was also highlighted as a top challenge for firms (28%) in 2024, alongside information challenges including managing the quality of deliverables (46%) and project collaboration (42%). Despite this, many firms (87%) still rely on manual data entry, including over a quarter (27%) that are completely reliant to manage projects’ financial data. This is concerning considering ambitious growth targets, with KPI tracking also decreasing in 2024. For example, in 2023, project profitability was tracked by 73% of firms, now tracked by 63%. Project KPI tracking has also declined in key areas, including client satisfaction (8% decline) and average billing rate (14% decline). Firms reported the need to improve tracking the monitoring of backlog (24%), utilisation rates (25%) and average collection period for A/R aged (24%).

Neil Davidson, VP EMEA and APAC at Deltek comments, “Despite optimism in growth opportunities, firms are at risk of not being able to accurately measure their success and understand where they are doing well and where changes need to be made. As projects become more complex, the metrics that firms need to track need to evolve. Investing in Project ERP as a backbone, will provide insight into business metrics, optimisation of processes, and support the productivity gains needed to help firms ensure they stay on-track and can demonstrate success confidently to key stakeholders.”

As projects develop, so do the requirements of the team. This is shown by more than a quarter (27%) of those surveyed reporting that developing the right knowledge/ upskilling staff to expand resources is a top challenge for project management over the coming three years. This is amplified by a strong intention to grow the workforce, with 61% of firms planning to increase the size of their workforce in 2024, building on the 54% that increased workforce size in 2023. Again, AI is seen as a key component of talent recruitment and retainment, 72% firms reporting that implementing AI successfully will improve job satisfaction.

Davidson concludes, “We are in an extremely exciting time for technological development. As AI becomes more integrated into our daily lives, we will start to see it become an enabler for our jobs, much in the same way as search engines revolutionised knowledge acquisition or video conferencing has advanced connections between multi-national teams. Not only is it a tool for productivity, it is seen as a must-have for advancing business capabilities and is fast becoming a key attraction for top talent looking to do more with their skills, without being hampered by administration.”