Corporate services need new business models to grow

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The corporate services landscape is changing quickly as several structural developments play out simultaneously. New technologies, chronic pressure on margins and the growing cry for transparency are all testing current business models.

Corporate service providers could improve their distinctive capacity by investing in new technology and business models that add value for clients. These are the conclusions of ABN AMRO’s 2014 sector update Visie op Zakelijke Dienstverlening, which was published today.

Structural decline in revenues and chronic pressure on margins

In 2013 revenues across the corporate services spectrum have declined. In the security sector office vacancy and the New Way of Working are largely to blame. To offset these trends, businesses are working to increase their efficiency. For instance, intelligent security software is rapidly gaining ground, at the expense of deployment of security personnel. In 2013, accountancy revenues dropped by 1.5%. With fees under permanent pressure, many accounting agencies are focusing on automating standard tasks and increasing productivity. Law firms also need to update their existing business models which are based on hourly fees and outdated business processes. In temping agencies revenues are under constant pressure: in 2013 their returns came 15% short of the 2008 figure, and volumes have dropped by as much as 25% since then.

More entrepreneurship is needed

Clients remain discerning when it comes to added value and fees of corporate service providers, and the dynamics in the sector are changing accordingly. Innovation is becoming part of the development routine for these providers. ABN AMRO, however, indicates that more entrepreneurship is needed. For example in security, where the emphasis is shifting towards cybersecurity and digital threats. The ‘Internet of Everything’ – where people, data, smart machines and other devices are linked – and big data are trends to watch going forward. Cleaning agencies, meanwhile, are investing in a makeover of their products and processes. Examples are innovative cleaning and hygiene systems and social innovations that focus mainly on optimising staff deployment. “As a business you need to play into new developments – the economy isn’t growing the way it used to. Responding to sector dynamics, adopting new technologies and offering customers added value in modern ways: these are the ingredients of a sound corporate service business in today’s interconnected society,” says Han Mesters, ABN AMRO’s Sector Banker Business Services.

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