Small operators on the rise in the professional services
- Smaller operators and self-employed professionals eager to fill the gaps left by major service providers
- Traditional boundaries between sectors disappearing
- Changing dynamics calling for new business models
Small operators upsetting market structure
Traditional operators are no longer calling the shots in the professional services. For example, major clients are no longer automatically turning to large companies; instead smaller specialist operators are seeing more and more opportunities. Particularly the rapid growth in the number of self-employed professionals is upsetting the market structure. Digitisation and automation allow start-ups and smaller firms to mature quickly and challenge the establishment. The market is fragmented and is becoming ever more small-scale. This is ABN AMRO’s conclusion in its Vision on Professional Services 2015, published today.
Smaller scale, more pressure on margins
Fierce competition is adding to the pressure on rates in the entire sector. Clients are critical about the added value and fees of professional service providers. For example, they consider many products of civil-law notary firms, law firms and accounting firms to be standard services that should be competitively and transparently priced. To compensate for this price pressure, firms are seeking to improve their efficiency, for example through automation and digitisation. Another development is that many accounting and law firms are contracting self-employed professionals more often, enabling them to move along with the market more easily. The smaller scale at management consultancy firms is also forcing rates down. The need to improve efficiency is unavoidable, ABN AMRO believes. The temporary employment industry must find an answer to the emergence of new operators on the market that use modern IT resources without possessing an extensive network of offices. Another factor is that temporary workers are becoming less important, while self-employed professionals and other flexible work forms are becoming more prominent.
New income models to create the conditions for growth
To realise growth in the longer term, professional service providers must adjust their income models. A series of shifts are gradually emerging in the professional services. The temporary employment sector is experiencing a trend toward increased specialisation or the addition of secondment, payrolling or brokering for self-employed professionals to the services. The role of civil-law notaries, lawyers, estate agents and accountants is shifting toward that of an adviser. ‘A “trusted advisor” that focuses on the client’s needs by delivering custom services and a high level added value,’ explains Han Mesters, Sector Banker Professional Services at ABN AMRO. ‘Cleaning and security firms are also becoming geared toward specialisation and added services, including in the direction of non-sector services, for example homecare. They should also focus on services that help clients to solve their problems. Technology will be used more and more for this purpose, for example devices for remote security and equipping security personnel and cleaners with mobile tools and apps.’