Professional Services
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Industry Overview
The US professional services industry includes about 700,000 firms with combined annual revenue of about $1 trillion. Major firms include Accenture, Computer Services Corporation (CSC), Gensler, IBM, Jacobs Engineering Group, Omnicom, PricewaterhouseCoopers, and Skadden, Arps, Slate, Meagher & Flom. The industry is highly fragmented: the 50 largest firms account for less than 25 percent of revenue.
The professional services industry includes accounting, advertising and marketing, architectural, consulting, engineering, IT, legal, and scientific research services. The industry does not include insurance, securities, or real estate brokerage services.
Competitive Landscape
Demand is driven by corporate profits and the overall health of the US economy. Although some professional services are necessary for the normal functioning of most companies, many services can be postponed during economic downturns. The profitability of individual firms depends on having a regular flow of projects. Large firms have advantages in marketing and in being able to offer wider ranges of services to meet the needs of major clients. Small firms can compete successfully by offering special expertise or focusing on particular regions. Revenue per employee varies among the different types of professional services, but overall, the industry is labor-intensive: average annual revenue per employee is about $135,000.
Products, Operations & Technology
The three largest industry segments are IT services, legal services, and architectural and engineering services, each of which accounts for about 20 percent of revenue. Consulting and accounting services generate about 15 percent and 10 percent of revenue, respectively; other major segments include scientific research and advertising.
Professional services often involve expert advice, but routine operations, transactions processing, design work, and project supervision are also included in the industry. Most work is project-oriented, although many legal and accounting services are delivered on a continuing basis.
Firms consist mainly of a staff of professionals with various levels of expertise, along with support personnel with technical or clerical skills. A typical customer project is supervised by senior staff and executed by a team of junior professionals and support staff. In some cases a project team can include hundreds of individuals and require complex coordination. Some professional firms provide services that require special expertise but are needed only occasionally. Because of this intermittent, or single, use, firms can make their expertise available to many customers and serve several customers at the same time.
Many professional firms have big investments in computer and communications technology, because a large amount of work is done outside the home office. Coordination among team members is also critical. Project management software is used extensively. Engineering, advertising, and architecture firms also use advanced CAD and video editing systems.
