Professional Services Sector
Description
Companies in this industry provide specialized professional, scientific, and technical activities for others. Major firms include AECOM, Bechtel, DXC, IBM, IQVIA, Jacobs, Latham & Watkins, McKinsey & Company, and Omnicom (all based in the US), as well as Accenture (Ireland); Capgemini (France); and Deloitte, PricewaterhouseCoopers, and WPP (all based in the UK).
The professional services market is forecast to reach about $2 trillion by 2029, according to Technavio. The US continue to be one of the leading markets for professional services. The average spend per employee is projected to reach about $48 in 2025, according to FMC Group.
The US professional services industry includes about 915,000 establishments (single-location firms and units of multi-location firms) with combined annual revenue of about $1.8 trillion.
COMPETITIVE LANDSCAPE
Professional services providers face a number of challenges, from dependence on corporate spending and trends in the global economy to customers or potential customers choosing to do the work themselves. While the average business may not decide to in-source architectural plans for a new office, accounting, marketing, and IT services can all be brought in-house and often are.
Large companies are better positioned to win national accounts. Small companies can compete effectively by offering highly specialized services or focusing on a single geographic region or local market; they typically also have less overhead, which allows them to charge less. The US industry is highly fragmented: the 50 largest firms account for less than 20% of revenue.
Competitive Advantages:
Investing in Technology -- Some law firms have embraced artificial intelligence and used it to create custom tools for clients or launch in-house legal advice chatbots. Companies can also use electronic discovery, legal process outsourcing, and offshore legal support services to reduce costs and save lawyers' energies for complex tasks. In advertising, agencies that can help customers keep their footing in traditional TV and print ads while successfully navigating online and social media marketing will attract more customers.
Structure -- With so many professional services firms now operating across borders, the need to limit liability and have flexible management structures continues to grow. In legal services, two popular corporate structures that address both needs are vereins (associations) and company limited by guarantee (CLG, or not-for-profit).
M&A -- Many professional services firms increasingly seek growth through acquisitions. Large firms combine with each other, often across borders, and firms of all sizes buy smaller companies to add expertise in certain industries or offices in certain countries.
Offering Simplicity -- Major global corporations, which are the customers of many professional services firms, are trying to streamline and reduce complexity in their own businesses. Professional services firms that can bring together multiple offerings in a simplified approach stand to benefit.
Companies to Watch, Legal:
Kirkland & Ellis serves elite, niche clients in the corporate, intellectual property, tax, restructuring, and litigation fields. The company is a leading revenue earner in the legal field.
Dentons has around 6,000 lawyers worldwide, a number of whom are located in China. No other firm in the global top 20 has that kind of focus on China. The company has conducted a large number of acquisitions to grow in recent years.
DoNotPay started as a bot to help people fight parking tickets in the UK. The company has expanded to cover hundreds of issues including consumer, immigration, and workplace legal areas in the US and the UK, free of charge.
Companies to Watch, Advertising:
Already one of the largest consulting firms, Accenture has purchased numerous companies to expand its capabilities in the advertising and marketing digital transformation space. The company's interactive division is the world's largest digital ad agency, according to Ad Age.
Preacher, an emerging independent, boasts established clients like Crate & Barrel as well as newcomers Venmo (owned by Paypal) and youth apparel firm Bonobos. The agency won acclaim for showing the human side of VR with its ads for Samsung Gear VR headsets.
Canadian firm Zulu Alpha Kilo was Ad Age's International Small Agency of the Year in 2017. Providing ideas and proposals on spec has long been a staple of the advertising industry, but Zulu Alpha Kilo has a strict no-spec policy so it can focus resources on existing clients.
Companies to Watch, Consulting:
Bain & Company -- One of the top three management consulting firms, Bain provides services in more than 25 countries. The company specializes in M&A work.
Deloitte Consulting gets high marks for its work helping clients improve efficiency and profitability across a wide range of industries from autos to energy and even for its legal work.
Tata Consultancy Services, India's largest software exporter, is also a strong global player in the IT services industry. It offers services including application development and business process consulting.
PRODUCTS, OPERATIONS & TECHNOLOGY
The main revenue sources of professional services segments include the customization and integration of packaged software (about 10%) and legal services (about 10%). Other services include customer software application design and development (about 5%), strategic management consulting and implementation (about 5%), and business process management services (less than 5%).
IT services firms provide computer systems design, development, and integration services; application design and development services; and technical support. IT services companies help clients select hardware and software systems and assist them in using computers, software, and communications systems more efficiently. They also provide services such as business function outsourcing, data warehousing, systems planning, enterprise resource planning, and training.
Architectural services firms plan and design residential, institutional, leisure, and industrial buildings and spaces, as well as landscapes. Engineering firms provide construction design and management, industrial process design, systems engineering, and maintenance and operations.
Law firms typically operate as partnerships. Operations support the provision of legal advice and other services, such as document preparation and production, legal filings, and litigation. Most work falls under the general categories of transactional or litigation.
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. Organizations that provide intermittent or one-time services typically work with many different clients at the same time.
The professional services market is forecast to reach about $2 trillion by 2029, according to Technavio. The US continue to be one of the leading markets for professional services. The average spend per employee is projected to reach about $48 in 2025, according to FMC Group.
The US professional services industry includes about 915,000 establishments (single-location firms and units of multi-location firms) with combined annual revenue of about $1.8 trillion.
COMPETITIVE LANDSCAPE
Professional services providers face a number of challenges, from dependence on corporate spending and trends in the global economy to customers or potential customers choosing to do the work themselves. While the average business may not decide to in-source architectural plans for a new office, accounting, marketing, and IT services can all be brought in-house and often are.
Large companies are better positioned to win national accounts. Small companies can compete effectively by offering highly specialized services or focusing on a single geographic region or local market; they typically also have less overhead, which allows them to charge less. The US industry is highly fragmented: the 50 largest firms account for less than 20% of revenue.
Competitive Advantages:
Investing in Technology -- Some law firms have embraced artificial intelligence and used it to create custom tools for clients or launch in-house legal advice chatbots. Companies can also use electronic discovery, legal process outsourcing, and offshore legal support services to reduce costs and save lawyers' energies for complex tasks. In advertising, agencies that can help customers keep their footing in traditional TV and print ads while successfully navigating online and social media marketing will attract more customers.
Structure -- With so many professional services firms now operating across borders, the need to limit liability and have flexible management structures continues to grow. In legal services, two popular corporate structures that address both needs are vereins (associations) and company limited by guarantee (CLG, or not-for-profit).
M&A -- Many professional services firms increasingly seek growth through acquisitions. Large firms combine with each other, often across borders, and firms of all sizes buy smaller companies to add expertise in certain industries or offices in certain countries.
Offering Simplicity -- Major global corporations, which are the customers of many professional services firms, are trying to streamline and reduce complexity in their own businesses. Professional services firms that can bring together multiple offerings in a simplified approach stand to benefit.
Companies to Watch, Legal:
Kirkland & Ellis serves elite, niche clients in the corporate, intellectual property, tax, restructuring, and litigation fields. The company is a leading revenue earner in the legal field.
Dentons has around 6,000 lawyers worldwide, a number of whom are located in China. No other firm in the global top 20 has that kind of focus on China. The company has conducted a large number of acquisitions to grow in recent years.
DoNotPay started as a bot to help people fight parking tickets in the UK. The company has expanded to cover hundreds of issues including consumer, immigration, and workplace legal areas in the US and the UK, free of charge.
Companies to Watch, Advertising:
Already one of the largest consulting firms, Accenture has purchased numerous companies to expand its capabilities in the advertising and marketing digital transformation space. The company's interactive division is the world's largest digital ad agency, according to Ad Age.
Preacher, an emerging independent, boasts established clients like Crate & Barrel as well as newcomers Venmo (owned by Paypal) and youth apparel firm Bonobos. The agency won acclaim for showing the human side of VR with its ads for Samsung Gear VR headsets.
Canadian firm Zulu Alpha Kilo was Ad Age's International Small Agency of the Year in 2017. Providing ideas and proposals on spec has long been a staple of the advertising industry, but Zulu Alpha Kilo has a strict no-spec policy so it can focus resources on existing clients.
Companies to Watch, Consulting:
Bain & Company -- One of the top three management consulting firms, Bain provides services in more than 25 countries. The company specializes in M&A work.
Deloitte Consulting gets high marks for its work helping clients improve efficiency and profitability across a wide range of industries from autos to energy and even for its legal work.
Tata Consultancy Services, India's largest software exporter, is also a strong global player in the IT services industry. It offers services including application development and business process consulting.
PRODUCTS, OPERATIONS & TECHNOLOGY
The main revenue sources of professional services segments include the customization and integration of packaged software (about 10%) and legal services (about 10%). Other services include customer software application design and development (about 5%), strategic management consulting and implementation (about 5%), and business process management services (less than 5%).
IT services firms provide computer systems design, development, and integration services; application design and development services; and technical support. IT services companies help clients select hardware and software systems and assist them in using computers, software, and communications systems more efficiently. They also provide services such as business function outsourcing, data warehousing, systems planning, enterprise resource planning, and training.
Architectural services firms plan and design residential, institutional, leisure, and industrial buildings and spaces, as well as landscapes. Engineering firms provide construction design and management, industrial process design, systems engineering, and maintenance and operations.
Law firms typically operate as partnerships. Operations support the provision of legal advice and other services, such as document preparation and production, legal filings, and litigation. Most work falls under the general categories of transactional or litigation.
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. Organizations that provide intermittent or one-time services typically work with many different clients at the same time.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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